* SPDR Gold holdings <XAUEXT-NYS-TT> unchanged since Oct. 7
* Dollar weakens on view Fed to keep rates near zero
* CME move to use gold as collateral boosts trading activity
* Platinum hits fresh 13-month high
By Chikako Mogi
TOKYO, Oct 20 (Reuters) - Gold rose closer to last week's
record highs above $1,070 an ounce on Tuesday, as the dollar fell
to a 14-month low against a basket of six major currencies,
helping bullion maintain its appeal as a currency alternative.
Record speculative net long futures positions, weak physical
demand and scrap hitting the markets as prices hover near record
peaks are slowing gold's climb back to their highs.
But market expectations for U.S. interest rates to stay near
zero for several more months continue to weigh on the greenback,
whose weakness makes bullion less expensive for holders of other
currencies.
"Since there is no sign in sight of a turnaround in the
dollar's weakness, investors are holding onto their long
positions in gold, even when there is wariness about current high
prices being not really justifiable," said Wakako Harada, senior
trader at Mitsubishi Corp.
"Prices are driven by option-related positions, by a very
small group of investors playing large lots, and by a very thin
market," she said. "Traders are just left behind."
Spot gold <XAU=> was at $1,066.45 per ounce at 0300 GMT, up
0.5 percent from $1,060.70 in late New York trade on Monday.
U.S. gold futures for December delivery <GCZ9> were at
$1,067.7 per ounce, up nearly 1 percent from $1,058.10 in the
COMEX division of the New York Mercantile Exchange.
Last week, spot gold soared to an all-time high of $1,070.40
an ounce, while New York gold futures hit a record peak of $1,072
on the greenback's weakness.
Near-term resistance is seen around $1,068, a level it took
time to break through, when it hit a record high of $1.070.40 on
Oct. 14. Support is seen at $1,055.43, the 10-day moving average.
CME Group Inc <CME.O>, the world's top derivatives exchange
operator, began accepting physical gold as collateral for all
trading products, the first time an exchange has allowed gold
bullion to be used for margin requirements. []
"Everybody is long in gold so it is convenient. The move will
help stimulate trading on the exchange," Harada said, adding that
she hoped other exchanges would follow suit.
While the dollar weakness made it almost certain gold would
hit new records in coming days, some analysts said a lack of
momentum in gold's rise despite the dollar's renewed decline on
Tuesday suggests there is slight wariness about the risk of U.S.
interest rates rising sooner than many think.
The Federal Reserve holds its policy meeting on Nov. 3-4 and
few expect the U.S. central bank to raise interest rates at the
meeting.
"If it's confirmed that the Fed does not raise interest rates
at next month's meeting, the dollar likely will face renewed
selling pressure, hoisting gold to fresh highs," said Masayo
Kondo, president at Fisco Commodity Inc.
"While the chance of a rate rise is very small, there is also
growing wariness that the Fed may make suggestions at the meeting
about the future course of interest rates, and that is keeping
funds from aggressively putting money into gold," he said.
Oil's rise to a one-year high just above $80 put upward
pressure on U.S. gasoline prices, and worries about rising prices
could make it easier for the Fed to justify nudging up rates from
near zero, Kondo said.
Oil <CLc1> rose as high as $80.05 a barrel on Tuesday, its
highest since Oct. 14, 2008, on a weak dollar and firm U.S. stock
markets. []
Rising oil prices support gold as a hedge against oil-induced
inflation risks.
A nationwide strike by miners in Peru, the world's sixth
largest gold producer, also improved buying sentiment.
Reflecting slowing investor inflows into gold, the world's
largest gold-backed exchange-traded fund, the SPDR Gold Trust
<GLD>, said its holdings stood at 1,109.314 tonnes as of Oct. 19,
unchanged since Oct. 7. The holdings rose to a record high of
1,134.03 tonnes on June 1. []
Gold's rise pulled other precious metals higher, with
platinum hitting a fresh 13-month high of $1,365.0 per ounce
<XPT=> while palladium rose as high as $333 <XPD=>, just below a
14-month high of $333.5 hit on Monday.
Precious metals prices at 0305 GMT
Metal Last Change Pct chg YTD pct chg Turnover
Spot Gold 1066.70 4.00 +0.38 21.20
Spot Silver 17.88 0.10 +0.56 57.95
Spot Platinum 1363.50 8.00 +0.59 46.30
Spot Palladium 332.00 0.00 +0.00 79.95
TOCOM Gold 3108.00 27.00 +0.88 20.79 38430
TOCOM Platinum 3973.00 47.00 +1.20 49.81 8266
TOCOM Silver 519.80 10.70 +2.10 62.79 310
TOCOM Palladium 968.00 9.00 +0.94 76.00 135
Euro/Dollar 1.4980
Dollar/Yen 90.30
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Additional reporting by Bruce Hextall in Sydney; Editing by
Joseph Radford)
