* Gold, silver jump as dollar extends losses vs euro
* Fund interest, geopolitical tension prompt gold buying
* GM makes amended offer to bondholders, PGMs higher
(Recasts, updates with quotes, closing prices, adds NEW YORK
to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, May 28 (Reuters) - Gold rose more than 1
percent on Thursday, fueled by a weakened dollar, inflation
concerns and renewed buying by investment funds.
Spot gold <XAU=> rose to a two-month high of $964.95 an
ounce -- the loftiest price since March 20 -- as the dollar
lost more ground against the euro, while silver hit a fresh
nine-month peak above $15 an ounce.
Spot gold traded at $960.80 an ounce at 3:04 p.m. EDT (1904
GMT), up 1.3 percent from its late Wednesday quote in New York
of $948.10 an ounce.
U.S. gold futures for August delivery <GCQ9> settled up $8
at $963.20 an ounce on the COMEX division of the New York
Mercantile Exchange.
"New fund buying came in over $955, and a crude rally,
euro's gains and technical buying also helped gold," said
George Gero, vice president of RBC Capital Markets Global
Futures. "Silver was helped by option activity from funds
getting long positions in December contracts."
Silver <XAG=> hit a high of $15.25 an ounce, its firmest
level since August 2008. It was last at $15.15 an ounce, up 2.9
percent from its previous finish at $14.72.
"Platinum and palladium are following gold. Silver is
putting in a great performance above $15 and the euro is
clearly up," said Gerry Schubert, head of precious metals at
INTL Commodities.
"The weak long positions have been taken out of the gold
market," he added. "What you see is good quality buying, and
for the first time this month we are seeing physical buying out
of Turkey and Middle East."
LOWER DOLLAR SUPPORTS GOLD
Reports in the United States showed better-than-expected
readings on durable goods orders and weekly jobless claims,
boosting risk appetite and hurting the dollar. []
Gold has recently re-established its close negative
correlation with the U.S. currency after the relationship
weakened earlier this year, as risk aversion took the driver's
seat in both the bullion and currency markets. []
Meanwhile, a heightened military alert for the Korean
peninsula by the United States and South Korea over a nuclear
test by the North boosted the safe-haven appeal in gold,
traders said. []
The prospect of rising inflation in the longer term is also
likely to support gold, a key hedge against rising prices.
Investor demand for the metal remains relatively soft after
the heavy buying seen in early 2009. Holdings of the main gold
exchange-traded fund, the SPDR Gold Trust <GLD>, were
unchanged, albeit near record levels, for a third straight
session.
Holdings of a much smaller ETF operated by Swiss bank
Julius Baer <BAER.VX> are expected to rise to a record 1.599
million ounces by Friday, however. []
Among other precious metals, platinum <XPT=> was at
$1,141.00 an ounce, up 0.8 percent from its late Wednesday
quote of $1,131.50 in New York, while palladium <XPD=> was at
$225 an ounce, up 1.4 percent from its previous finish of
$222.
Platinum group metals turned higher on a broad-based
commodities rally. Initially, however, they were pressured by
fears over the demand outlook, especially from the ailing auto
sector, which typically consumes half of the world's annual
output of the white metal as a component in exhaust system
catalytic converters.
General Motors <GM.N> made an improved equity exchange
offer to bondholders with $27 billion in debt intended to pave
the way for a quick bankruptcy process. []
"GM seems set for bankruptcy and this is keeping investors
cautious on platinum and palladium, hence the currently low
platinum/gold ratio of 1.19," said UBS analyst John Reade in a
note.
(Reporting by Frank Tang and Jan Harvey; editing by Jim
Marshall)
