* Gold eyes new record high as the dollar weakens
* COMEX long positions, lack of physical buying could cap
(Recasts, updates prices and comments, previous SINGAPORE)
By Humeyra Pamuk
LONDON, Sept 22 (Reuters) - Gold climbed over 1 percent to
trade within striking distance of its all-time high on Tuesday,
as the dollar fell across the board ahead of a Federal Reserve
meeting on interest rates.
Spot gold <XAU=> was at $1,012.15 an ounce by 0920 GMT,
versus $1,002.55 an ounce late in New York on Monday, when it
fell to $995.50 an ounce, its lowest in almost a week.
Traders said further dollar weakness could trigger a rally
which could send bullion above its 18-month high of $1,023.85 an
ounce hit last week, only a tad lower than its record high of
$1,030.80 an ounce struck in March 2008.
But lack of physical buying due to high and volatile price,
worries about a liqudiation from speculators who have built
extremely long positions in New York and the potential impact of
IMF's gold sales plan have all capped further gains.
"It was a tough cookie to crack last week, and it still is,"
said Afshin Nabavi, head of trading at MKS Finance. "We need
some fresh news to provide the momentum...I'm bullish but I
think we need a more substantial correction than the one we saw
yesterday," he said.
Some traders said the dollar weakness could give that boost.
"I find it difficult in the near term for gold to do
anything independent from the dollar," said Ole Hansen, senior
manager at Saxo Bank. "Gold will probably rally to a new record
if we see a sudden burst of activity on the dollar," he said.
The euro hit a one-year high against a broadly weak dollar
as dealers took advantage of the U.S. currency's rise the
previous session to resume selling ahead of a Federal Reserve
monetary policy meeting and G20 meeting.[]
The market watched for the outcome of the two events, which
could have an impact on the dollar.
LET THE STEAM OUT
The Federal Open Market Committee was expected to hold rates
steady but markets want to know if there are signs that the
policy stance will be wound back, given a recent pick-up in
economic data. []
But noncommercial net long positions in gold futures in New
York at an all-time high of 235,647 lots for the week ended
Sept.15 worried investors as it could spark a long liquidation.
[]
"We need to see the previous record high broken to let some
steam out of this market. As long as we fail to get through that
level there's always the risk that we could see long liquidation
on disappointment," Hansen at Saxo Bank said.
U.S. gold futures for December delivery <GCZ9> fell $9.30 an
ounce at $1,014.2 on the COMEX division of the New York
Mercantile Exchange.
But lower prices could attract buying from main consumer
India, where weddings take place during the current festive
season, which peaks in October with Diwali, the Hindu festival
of lights.
"We need the physical market to come and obviously at these
levels that market is very hesitant," Nabavi at MKS Finance
said.
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings stood at 1,101.735
tonnes as of Sept 21, up from 1,086.479 tonnes the previous day.
In other metals, silver rose to $17.09 an ounce compared
with Monday's $16.80, while palladium <XPD=> was at $297 an
ounce versus $294.50 an ounce. It hit $304 an ounce last week,
its highest since end-August 2008.
Platinum <XPT=> was at $1,323 an ounce compared with
$1,315.50 an ounce.
(Reporting by Humeyra Pamuk, Editing by William Hardy)
