* Gold hits record in dollar, euro, sterling terms
* Traders eye ECB decision, policy announcement at 1245 GMT
* Shanghai gold exchange to launch palladium trading
(Updates throughout, changes dateline from TOKYO)
By Jan Harvey
LONDON, Dec 3 (Reuters) - Gold prices rallied to fresh
record highs above $1,225 an ounce in Europe on Thursday as the
dollar slid towards a 16-month low against the euro, fuelling
buying of the metal as an alternative asset.
Weakness in the U.S. currency is adding fuel to an
impressive cross-currency rally in gold prices, sparked by talk
of fresh central bank buying and supported by fears over the
inflation outlook and a broad-based rise in commodity prices.
Spot gold <XAU=> hit a high of $1,226.10 an ounce and was at
$1,218.85 at 1026 GMT, against $1,215.90 late on Wednesday.
Saxo Bank senior manager Ole Hansen said a raft of factors,
including central bank buying and fears over the currency
markets, were supporting gold. "It has obviously been helped by
the recovery in the euro and weakness in the dollar," he said.
The metal is ignoring its usual technical indicators as it
moves further above previous record levels, he added.
"We are into new territory every time we make new highs,"
said Hansen. "It is easy to break up a percent, because there
are no levels to look for as resistance.
"The way gold is going, despite showing overbought, just
indicates that it is something one shouldn't really get in the
way of. All the forces are at play for gold."
The main price driver remains the euro-dollar exchange rate.
Weakness in the U.S. unit boosts gold's appeal as an alternative
asset and makes dollar-priced commodities cheaper for holders of
other currencies.
The euro climbed on speculation the European Central Bank
may take the first steps in winding down quantitative easing at
a policy meeting later in the day, analysts said. []
CENBANKS EYED
The ECB is widely expected to hold rates at a record low 1.0
percent when it announces its policy decision at 1245 GMT.
Analysts will be watching a news conference by ECB President
Jean-Claude Trichet following the decision to see whether he
will further outline the central bank's exit strategy from
fiscal stimulus measures.
Meanwhile the dollar slipped after Bank of America said it
will repay bailout funds, stoking risk appetite and boosting
stock markets. World stocks hit a new 14-month high, while
European shares rose in early trade. [] []
Gold hit record highs in euro and sterling terms as well as
in the dollar. Euro-priced gold <XAUEUR=R> reached a peak of
812.43 euros an ounce, while gold denominated in sterling
<XAUGBP=R> hit a high of 735.20 pounds an ounce.
For graphic of gold's performance in other currencies, click
on: http://graphics.thomsonreuters.com/129/GLD_CURR1209.gif
Gold analysts say they are watching for signs of further
central bank gold buying, after India's 200-tonne purchase
announced in early November and subsequent small acquisitions by
Sri Lanka, Mauritius and Russia sparked a sharp prices rise.
A Chinese industry executive said on Thursday there is more
scope for China to increase purchasing gold, but not in the open
market and only over a longer-term period. []
Among other precious metals, silver <XAG=> was at $19.20 an
ounce against $19.20. The world's main silver exchange-traded
fund, the iShares Silver Trust <SLV>, said its silver holdings
fell 3.49 tonnes from record levels on Wednesday. []
Spot platinum <XPT=> was at $1,496 an ounce against
$1,500.50, while palladium <XPD=> was at $387 against $387.50.
The Shanghai Gold Exchange is to begin trading palladium,
the exchange chairman told a conference on Thursday. "The
government approval process is nearing an end," he said.
[]
(Reporting by Jan Harvey; Editing by Keiron Henderson)
((jan.harvey@thomsonreuters.com; +44 207 542 7744; Reuters
Messaging: jan.harvey.reuters.com@reuters.net))
