* Dollar takes little reassurance from World Bank, IMF meets
* Further U.S. quantitative easing still seen on the cards
* Gold:silver ratio falls to lowest since Aug. 2008
(Updates prices, adds detail)
By Jan Harvey
LONDON, Oct 11 (Reuters) - Gold rose back towards $1,350 an
ounce in Europe on Monday as the dollar languished, with
confidence in the U.S. currency undermined by expectations the
Federal Reserve will persist with a loose monetary policy.
The dollar has lost significant ground in recent weeks due
to speculation that the Fed will introduce further monetary
easing after a spate of soft economic data. This helped push
gold prices to a record $1,364.60 an ounce last week.
Spot gold <XAU=> was bid at $1,348.95 an ounce at 1438 GMT,
against $1,343.25 late in New York on Friday. U.S. gold futures
for December delivery <GCZ0> rose $4.40 an ounce to $1,349.70.
Afshin Nabavi, head of trading at MKS Finance in Geneva,
said he remains broadly positive on gold, with the dollar the
main driver of the market.
"$1,339-$1,340 ought to remain a good support," he said. "A
breach of that could send us to $1,335, but I still think $1,400
a good possibility for the year-end."
"This move is probably a correction in a thin market with
some of the New York guys absent," he said, referring to
Monday's holiday in the United States.
The dollar stayed under pressure on Monday, with the IMF's
failure to reach an accord on how to tackle currency tensions at
meetings over the weekend seeming to ensure such concerns would
only mount up. []
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Graphic on gold's correlation with the dollar:
http://graphics.thomsonreuters.com/gfx1/SBrb_20101110115325.jpg
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Sources told Reuters on Monday that China has raised reserve
requirements by 50 basis points for six large commercial banks
in a move to drain cash from the economy, the latest in a
succession of moves to tighten credit conditions in some global
markets. []
UNEQUIVOCAL BENEFIT
Expectations for further quantitative easing are likely to
continue boosting precious metals, analysts said.
"We view quantitative easing and its monetary consequences
as an unequivocal benefit for gold and silver in particular, as
investors seek out their role as stores of value in times of
fiat currency risk," said Morgan Stanley in a note.
As well as currency effects, gold is being supported by
expectations investors will add to their bullion holdings as a
portfolio diversifier, both in the private and official sectors.
Russia's central bank has bought over 100 tonnes of gold on
the domestic market this year, board member Sergei Shvetsov said
on Monday, and speculation is rife that other central banks,
mainly in Asia, will also lift their holdings. []
Gold supply is struggling to meet rising demand. Output in
number one producer China was 27.655 tonnes in August, the
Ministry of Industry and Information Technology said on Monday,
down 11 percent from 31.059 tonnes in July. []
Silver <XAG=> hit its highest level since 1980 at $23.65 an
ounce and was later bid at $23.21 an ounce against $23.20.
Holdings in the iShares Silver Trust <SLV>, the world's
largest silver-backed exchange-traded fund, rose to a new
all-time high at 10,085.62 tonnes on Friday. []
The gold-silver ratio - the number of ounces of silver
needed to buy an ounce of gold - fell to its lowest in more than
two years on Monday near 57, down from above 68 in late August,
as silver became increasingly expensive compared with gold.
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For a graphic on the ratio, click:
http://graphics.thomsonreuters.com/AS/0810/RS_20101110113030.jpg
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"We continue to favour silver as industrial demand and
imports into China are expected to push the gold/silver ratio
lower," said Deutsche Bank in a weekly note.
Platinum <XPT=> was at $1,688.50 an ounce against $1,699.35,
and palladium <XPD=> at $585.50 against $583.53.
(Editing by Sue Thomas)
