* Inflation outlook, dollar weakness buoy gold
* SPDR gold ETF rises to fresh record
* Platinum tracks gold up to near 6-month high
(Updates prices)
By Jan Harvey
LONDON, March 20 (Reuters) - Gold eased on Friday as the
dollar's strength versus the euro prompted profit taking in the
precious metal, tipping it from the three-week high it hit
earlier in the session.
But prices remain firmly underpinned by investors' interest
in the metal as a haven from inflation and broad dollar weakness
in the wake of the U.S. Federal Reserve's move towards
quantitative easing.
Spot gold <XAU=> hit a peak of $966.70 an ounce, its firmest
since Feb. 25. It had eased to $950.15/951.35 an ounce by 1310
GMT from $958.60 late on Thursday as the dollar recovered lost
ground against the euro.
Prices have risen sharply since the Fed announced plans on
Wednesday to buy $300 billion in longer-dated Treasuries,
flooding the market with dollars and prompting a sharp drop in
the value of the U.S. currency and a increased inflation fears.
"When you look at the gold market, there is a huge dynamic
in place, which is an increasing loathing of currencies," said
Nick Moore, an analyst at RBS Global Banking & Markets. "The
only true currency, which is gold, is the beneficiary of that."
"If central banks around the world are keen to avoid
deflation, then by definition they must have inflation, and that
plays straight into gold's hands," he added.
Gold has benefited in recent days from a sharply weaker
dollar, increasing interest in the precious metal as an
alternative asset.
The dollar is heading for its biggest weekly fall in 24
years, although worries over the euro zone economy have boosted
it versus the single currency. []
Investor interest in gold remains firm, with the world's
largest exchange-traded fund, the SPDR Gold Trust <GLD>,
reporting a new 15.28-tonne inflow on Thursday which brought its
holdings to a record. []
Buying of gold by ETFs, which back the securities they issue
with physical stocks of bullion, has formed a major plank of
demand in recent months. SPDR alone has added 323 tonnes of gold
to its reserves so far this year, against 17 tonnes a year ago.
EXCESS
Demand from ETFs is helping to mop up some of the excess
supply in the market left over from a drop-off in jewellery
buying. Jewellers in key markets such as India say the metal's
sharp price rise has hit sales hard. []
It has also led to a surge in supply of scrap gold as
consumers sell old or outdated jewellery to raise cash.
Barclays Capital said in a note it is raising its 2009 gold
price view to $940 an ounce, citing the dollar outlook.
"Plans for further quantitative easing by the U.S. has seen
the dollar nosedive," it said. "In that environment, gold will
shine." []
Among other precious metals, platinum rose to a near
six-month high of $1,127.50 an ounce, boosted by dollar weakness
and strength in the gold price.
The metal, primarily an industrial commodity used as a key
component in autocatalysts, may also be benefiting from a shift
in analysts' attention from a strongly recessionary outlook in
the wake of the Fed statement on Wednesday.
"Given the bullish sentiment in gold and silver and rising
investment demand, we could see platinum target chart resistance
at $1,265," James Moore, an analyst at TheBullionDesk.com, said.
Spot platinum <XPT=> was at $1,119.50/1,124.50 an ounce from
$1,122.50, while spot palladium <XPD=> edged up to
$205.50/210.50 an ounce from $203.50.
Spot silver <XAG=> eased to $13.51/13.57 an ounce from
$13.57, tracking gold.
(Editing by Sue Thomas)
