* Investment fund buying offsets liquidity withdrawal fear
* Gold hits records in dollar, euro, sterling terms
* Goldman Sachs lifts bullion price forecasts
(Recasts, updates comments, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Dec 3 (Reuters) - Gold prices ended higher
on Thursday but off a record peak earlier in the session as
strong buying by investment funds more than offset news that
central banks could be withdrawing liquidity from the financial
system.
Bullion has gained nearly 40 percent year to date, driven
by a combination of central bank buying, paper currency
depreciation and inflation worries.
Andrew Montano, a director of Toronto-based bullion dealer
ScotiaMocatta, said that investment flows into the gold market
are driving prices to record highs.
"Physical gold continues to be piling up in vaults. There
is a lot of metal built up in vaults owned by exchange traded
funds as well as private funds," Montano said.
Spot gold <XAU=> was volatile, hitting a record high of
$1,226.10 an ounce, before falling as low as $1,203.90. It was
at $1,216.95 at 3:03 p.m. EST (2003 GMT), versus $1,215.90 late
on Wednesday.
U.S. February gold futures <GCG0> settled up $5.30 at
$1,218.30 an ounce on the COMEX division of NYMEX.
Gold has rallied as governments flooded the system with
money to jolt the economy out of recession. However, markets on
Thursday are rattled by signs that central banks could be
tightening money supply, traders said.
New York Federal Reserve on Thursday conducted a small
reverse repurchase agreement transaction to test the
cash-draining tool. Dealers said that was seen as the Fed
testing the water of liquidity withdrawal. []
Also, ECB President Jean-Claude Trichet laid out a package
of decisions on ending and tightening up liquidity.
[]
Late in the sessions, gold turned higher as the dollar
weakened against the euro following Trichet's comments on
possible exit strategies from quantitative easing.
Saxo Bank senior manager Ole Hansen said a raft of factors,
including central bank buying and fears over the currency
markets, were supporting gold. He said the metal was ignoring
its usual technical indicators as it moves further above
previous record levels.
"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."
Goldman Sachs said it sees prices at an average $1,265 an
ounce in 2010, rising to $1,425 an ounce in 2011. It said low
U.S. interest rates will support gold. []
A poll of 33 analysts, traders and funds conducted by
Reuters this week found most believe gold prices are in for a
correction before the end of the year, though the precious
metal's bull run is still believed to be intact.
[]
GOLD HITS HIGHS IN EURO, POUNDS
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 735.28 pounds an ounce.
For graphic of gold's performance in other currencies,
click on:
http://graphics.thomsonreuters.com/129/GLD_CURR1209.gif
Among other precious metals, silver <XAG=> was at $19.08 an
ounce against $19.20.
Spot platinum <XPT=> was at $1,490.50 an ounce against
$1,500.50, while palladium <XPD=> was at $383.50 versus
$387.50.
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCG0> 1218.30 5.3 0.4 884.3 37.8
US silver <SIH0> 19.128 -0.197 -1.0 11.295 69.3
US platinum <PLF0> 1493.70 -12.60 -0.8 941.50 58.7
US palladium <PAH0> 386.80 -3.20 -0.8 188.70 105.0
Prices at 2:57 p.m. EST (1957 GMT)
Gold <XAU=> 1216.95 1.05 0.1 878.20 38.6
Silver <XAG=> 19.05 -0.15 -0.8 11.30 68.6
Platinum <XPT=> 1488.50 -12.00 -0.8 924.50 61.0
Palladium <XPD=> 383.50 -4.000 -1.0 184.50 107.9
Gold Fix <XAUFIX=> 1208.75 -9.50 -0.8 836.50 44.5
Silver Fix <XAGFIX=> 19.11 -7.00 -0.4 14.76 29.5
Platinum Fix <XPTFIX=> 1494.00 6.00 0.4 1529 -2.3
Palladium Fix<XPDFIX=> 386.00 3.00 0.8 365.0 5.8
(Reporting by Frank Tang and Jan Harvey; Editing by Marguerita
Choy)
((frank.tang@thomsonreuters.com; +1 646 223 6126;
Reuters Messaging: frank.tang.reuters.com@reuters.net))
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