* Record high in sight as dollar falls
* Gold used as hedge against falling currencies
* Palladium firm after climb to 13-1/2 month highs
(Recasts, updates comments, closing prices, adds second
byline, dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Oct 12 (Reuters) - Gold briefly rose
within striking distance of an all-time high above $1,060 an
ounce on Monday as the dollar's weakness increased the appeal
of bullion as a hedge against falling currencies.
Rising open interest and record noncommercial long
positions in the U.S. gold futures market underscored strong
investment demand, but analysts also warned of a possible
pullback due to profit taking.
Neal Greenberg, trader with New Jersey-based TraderNeal,
said that gold was mainly driven by a weakening dollar as the
U.S. Federal Reserve is not likely to raise interest rates any
time soon.
"Gold is not being used an inflation hedge as much as it's
being used a hedge against currencies. It seems like there is a
worldwide race from all central banks to devaluate their
currencies," he said.
Last week, gold rose 5 percent as dollar weakness pushed
the metal to a series of record highs. Investors bought the
metal as an alternative to paper currencies, and a weaker
dollar also makes gold cheaper for non-U.S. investors.
Spot gold <XAU=> was at $1,054.95 an ounce at 2:32 p.m. EDT
(1832 GMT), up from $1,048.25 late in New York on Friday but
off a record high of $1,061.20 set last week.
Most-active December gold futures <GCZ9> settled up $8.90
at $1,057.50 an ounce on the COMEX division of the New York
Mercantile Exchange.
The dollar dropped to session lows against the euro due to
concerns about the greenback's status as the preeminent reserve
currency. []
Rising investment demand also boosted prices, even as the
world's largest gold-backed exchange-traded fund SPDR Gold
Trust reported no change in holdings.
"We're seeing a huge amount of investor interest, be it
paper interest through speculators on COMEX or ETF holdings.
Given that short term investor interest seems to be driving
prices, that is setting the tone," said Suki Cooper, analyst at
Barclays Capital.
"The currency movements are pivotal, so if we see the
dollar strengthening, I think you could see gold prices start
to lose their momentum," she added.
PULLBACK WARY
But noncommercial net long positions in COMEX gold futures
rose to an all-time high of 239,668 lots in the week ended Oct.
6, up 3.6 percent from a week before, data from the U.S.
Commodity Futures Trading Commission showed. Meanwhile, open
interest for gold futures climbed above 500,000 lots.
<NYMMTLFUT/VOI>
"As long as gold is on the rise and the most recent long
positions remain in profit, this does not represent a risk
factor just yet," Commerzbank said in a note.
However, Commerzbank said that speculators could square
their long positions, potentially sending prices to under
$1,000 an ounce.
Among other precious metals, spot silver <XAG=> was at
$17.73 an ounce against $17.67. Platinum <XPT=> was at $1,337
an ounce against $1,332, while palladium <XPD=> was at $323.50
against $317.50.
Palladium climbed to its highest level since August 2008 on
Friday, supported by concerns over tightness in Russian supply,
traders said, and by strong technical support.
(Additional reporting by Veronica Brown in London)
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCZ9> 1057.50 8.9 0.8 884.3 19.6
US silver <SIZ9> 17.820 0.130 0.7 11.295 57.8
US platinum <PLF0> 1347.30 7.90 0.6 941.50 43.1
US palladium <PAZ9> 329.80 6.05 1.9 188.70 74.8
Prices at 2:33 p.m. EDT (1833 GMT)
Gold <XAU=> 1054.90 6.65 0.6 878.20 20.1
Silver <XAG=> 17.73 0.06 0.3 11.30 56.9
Platinum <XPT=> 1337.00 5.00 0.4 924.50 44.6
Palladium <XPD=> 324.50 7.000 2.2 184.50 75.9
Gold Fix <XAUFIX=> 1058.75 6.75 0.6 836.50 26.6
Silver Fix <XAGFIX=> 17.89 26.00 1.5 14.76 21.2
Platinum Fix <XPTFIX=> 1340.00 7.00 0.5 1529 -12.4
Palladium Fix<XPDFIX=> 324.00 3.00 0.9 365.0 -11.2
