* Dollar slides to 8-1/2 month low vs currency basket
* Markets eye U.S. data for pointers to more monetary easing
* SPDR gold ETF records third straight session of outflows
(Updates prices, adds detail)
By Jan Harvey
LONDON, Oct 5 (Reuters) - Gold rallied to record highs above
$1,325 an ounce in Europe on Tuesday as the dollar fell versus
the euro, with recent volatility in the currency markets
boosting demand for the metal as a safe store of value.
An announcement by the Bank of Japan that it would create a
pool of funds to buy assets to tackle strength in the yen also
helped gold. Moves by major economies to curb strength in their
economies are giving a major lift to the metal. []
Brazil on Monday doubled a tax on foreign investors buying
local bonds in an attempt to curb a currency rally that has
turned into an issue in the country's presidential race.
Spot gold <XAU=> hit a high of $1,328.05 an ounce and was
bid at $1,326.15 an ounce at 1129 GMT, against $1,315.20 late in
New York on Monday. U.S. gold futures for December delivery
<GCZ0> rose $10.70 an ounce to $1,327.50.
Gold prices appreciated as the dollar <.DXY> tumbled to an
8-1/2 month low against a basket of six major currencies,
pressured by broad-based demand for the euro. []
Gold is sensitive to moves in the dollar, as weakness in the
U.S. unit tends to lift gold's appeal as an alternative asset
and makes dollar-priced commodities cheaper for other currency
holders.
"This morning it is a dollar-related move, but it is also
the wider currency issues that have been highlighted by an
increasing number of commentators," said Tom Kendall, an analyst
at Credit Suisse.
"This morning it was the turn of the Institute of
International Finance to talk about currency tensions and the
need for some agreement on how to manage pressures between the
major currency pairs."
"You have also had Trichet and Mr Juncker talking about the
Chinese renminbi not having appreciated as fast as they would
have liked to have seen," he added. "All of this tension within
the forex world is what is playing into gold."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Comments by euro zone economic policymakers: []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Gold hit all-time highs in six consecutive sessions to
Friday, and after building a base above $1,310 an ounce on
Monday rose nearly 1 percent to a new record early on Tuesday,
lifted by concerns over further monetary easing.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on gold performance vs other commodities:
http://graphics.thomsonreuters.com/10/CMD_PRFG0510.html
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
FURTHER EASING EYED
"According to monetary theory, with interest rates at or
near historical lows across the OECD world, further easing in
monetary policy must take the form of liquidity injections,
rather than interest rate reductions," HSBC analyst James Steel
said in a note.
"In the case of the United States, if increased U.S. dollar
liquidity leads to a decline in the dollar, then gold is likely
to be a beneficiary."
Demand for physical gold retreated as prices rose again,
however. Buying in main gold consumer India was muted as the
weaker rupee added to pressure on local buyers. []
"As (jewellery demand) clearly weakens at the high price
level, the dependence on investment demand rises and this is
still relatively robust even if the world's largest gold ETF,
SPDR Gold Trust, reported slight outflows again yesterday," said
Commerzbank in a note.
"Net long positions of speculative financial investors
recently rose to a 12-month high."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Reuters Insider interview with Investec Asset Management's
Michael Power on gold: http://link.reuters.com/bej86p
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, declined for a third
session, while those of the largest silver ETF, the iShares
Silver Trust <SLV> dipped from record highs. []
Silver <XAG=> was at $22.20 an ounce against $21.97, having
earlier hit a 30-year high at $22.25 an ounce. Silver continued
to outperform gold, with the number of ounces of silver needed
to buy an ounce of gold slipping to a one-year low at 59.72.
Platinum <XPT=>, buoyed by strength in gold, hit a 4-1/2
month high at $1,687 an ounce and was later at $1,681 against
$1,664.85, while palladium <XPD=> was at $565.50 versus $557.83.
(Editing by Alison Birrane)
