* 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)
By Jan Harvey
LONDON, Oct 5 (Reuters) - Gold climbed 1.8 percent, its
biggest one-day rise since May 11, to record highs on Tuesday as
the dollar fell versus the euro and as recent volatility in the
currency markets boosted 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
currencies 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 $1,340.20 an ounce and was
bid at $1,337.50 an ounce at 1549 GMT, against $1,315.20 late on
Monday. U.S. gold futures for December delivery <GCZ0> reached a
peak of $1,341.70 and were later up $21.90 at $1,338.70.
"There are a number of supporting factors to the gold price
currently, including a stronger euro/dollar and the resumption
of the positive correlation between gold and euro/dollar, as
well as strong prospects for further quantitative easing in the
U.S.," said BNP Paribas analyst Anne-Laure Tremblay.
"However, we may see a correction on the FX side later this
year on deflation risks in the euro zone," she said. "In
addition, the increase in narrow liquidity may translate into
stronger risk appetite and... favour other assets besides gold."
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
unit tends to lift its appeal as an alternative asset and makes
dollar-priced commodities cheaper for other currency holders.
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 2 percent to a new record late on Tuesday,
lifted by concerns over further monetary easing.
Any further moves in the foreign exchange markets or signs
of currency intervention are likely to be positive for gold.
FOREX EYED
"In the short term we have got the annual meeting of the
World Bank and the IMF coming up this weekend, so there are
going to be some more FX-related headlines ahead of that," said
Tom Kendall, an analyst at Credit Suisse.
"There is no easy route out of these kinds of issues, where
you have an implicit weak dollar policy now in the U.S ... and
emerging markets trying to protect their own exporters by not
letting their currencies appreciate too rapidly and trying to
head off asset bubbles caused by the strength of capital
inflows. Those trends aren't going away in a hurry."
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 $22.59 an ounce against $21.97, having
earlier hit a 30-year high at $22.69 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 59.15.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on gold performance vs other commodities:
http://graphics.thomsonreuters.com/10/CMD_PRFG0510.html
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Platinum <XPT=>, buoyed by strength in gold, hit a 4-1/2
month high at $1,696.50 an ounce and was later at $1,693 against
$1,664.85, while palladium <XPD=> was at $574 versus $557.83.
(Editing by Jane Baird)
