* Fed chairman lifts dollar with hint of monetary tightening
* More record highs still seen amid worries over currencies
* Palladium hits fresh 13-1/2 month high at $321.50
(Adds comment, updates prices)
By Jan Harvey
LONDON, Oct 9 (Reuters) - Gold eased in Europe on Friday,
consolidating after hitting record highs for three straight
sessions, as an indication from the U.S. Federal Reserve chief
that monetary policy may be tightened lifted the dollar.
Spot gold <XAU=> was bid at $1,048.40 an ounce at 1426 GMT
against $1,054.00 late in New York on Thursday, opening up a gap
on its record this week of above $1,060 an ounce.
U.S. gold futures for December delivery <GCZ9> on the COMEX
division of the New York Mercantile Exchange fell $6.50 to
$1,049.80.
Fed chairman Ben Bernanke said at a conference on Thursday
he was thinking of an exit strategy from quantitative easing and
low interest rates as the U.S. economy improves. []
The statement lifted the dollar index <.DXY>, which measures
the U.S. unit's performance against a basket of six other major
currencies, from 14-month lows. []
"Everybody is watching the dollar. It was weak in the last
few days but it has clawed back a few losses today after
Bernanke spoke yesterday, so that has capped gold for the
moment," said Calyon metals analyst Robin Bhar.
"But there is a good argument that it is finding a floor
here down to $1,030, the previous high," he added. "That is
going to be support."
The dollar's decline had pushed gold to a series of record
highs, peaking at $1,061.20 an ounce on Thursday, as investors
bought the metal as an alternative to paper currencies. A weak
dollar also makes gold cheaper for non-U.S. investors.
Despite the dollar's bounce, persistent fears over currency
market instability are seen pushing gold to further records this
year as funds buy the metal as an alternative asset.
"It seems people are beginning to realise the real effect of
quantitative easing -- not only the threat to inflation, but the
threat to fiat (official) currencies," said Nick Bullman,
managing partner of hedge fund Bullman Investment Management.
"If you carry on just printing money, eventually people will
start to look for another store of value."
WEAK PHYSICAL DEMAND
Physical demand for gold remains weak as high prices deter
jewellers, traditionally the main buyers of gold. Buying in
India, the world's largest bullion market last year, has been
lacklustre despite the onset of the festival season.
The impact of a soaring dollar gold price had been cushioned
for domestic buyers by strength in the rupee, but the Indian
currency snapped five days of gains on Friday to weaken. []
Other major centres for physical gold trade such as the
Middle East have also seen little upturn in sales during the
present price run-up, suggesting it is based on large investment
rather than broad-based demand.
Among other precious metals, silver also retreated from the
14-month high at $17.92 an ounce it hit on Thursday. Spot silver
<XAG=> was at $17.74 an ounce against $17.72.
Spot platinum <XPT=> was at $1,336 an ounce against
$1,344.50, while palladium <XPD=> was at $320 against $318. The
metal used in autocatalysts hit a peak of $323, its highest
since mid-August 2008, earlier on Friday.
Palladium, which according to dealers underperformed other
precious metals earlier this year, has been lifted by gains in
gold, hopes demand will improve as the economy recovers and
concerns over the availability of Russian stocks.
"It is still good value to invest at these kinds of levels,"
said one platinum group metals trader. "Demand will certainly
improve, and on the Russian side there is talk of some tightness
coming through. That may be the general feeling in the market."
(Editing by James Jukwey)
