* Dollar drives gold higher after Fed minutes
* ETF flows into palladium spur 2-pct price gain
* Coming up: Fed Chairman Ben Bernanke Q+A; 2010 GMT
(Releads, updates prices, adds comment)
By Amanda Cooper and Jan Harvey
LONDON, Oct 13 (Reuters) - Gold surged to a record high at
$1,367.65 an ounce on Wednesday and silver to a 30-year peak
after the Federal Reserve signalled the U.S. economy may need
extra stimulus, which hit the dollar.
Gold prices have rallied nearly 25 percent so far this year
as investors turned to the metal as a haven from the effects of
an increasingly loose monetary policy.
Spot gold <XAU=> hit a peak of $1,367.65 an ounce and was
bid at $1,366.75 an ounce at 1417 GMT, against $1,349.60 late on
Tuesday. U.S. gold futures for December delivery <GCZ0> rose
$21.50 to $1,368.20, having earlier touched a record $1,368.90.
Silver <XAG=> hit a peak at $23.69, its strongest level
since 1980, and was bid at $23.63 an ounce against $23.28.
"Because we are in a world of quantitative easing in the
developed economies, and as QE is almost synonymous with
competitive devaluation... gold and the precious metals (are)
taking on the function of an alternative currency," said Ashok
Shah, chief investment officer at London and Capital.
"As we go into the next 1-4 quarters, the role of precious
metals as alternative currency will become much more paramount,"
he said. "The role of gold as an inflation hedge is not
important now, but it may become important in the next cycle,
when the time to reverse quantitative easing comes."
The dollar remained the main short-term driver of gold, with
the currency coming under broad selling pressure as speculation
grew that the Fed will introduce further monetary easing after
the release of minutes from its last policy meeting. []
Results from JPMorgan Chase <JPM.N>, the second-largest U.S.
bank by assets, helped the dollar cut some of its losses in
early afternoon trade and nudged gold down from session highs,
but it quickly bounced back.
Gold's inverse relation to the U.S. dollar was at its most
pronounced in six months on a 30-day rolling basis in early
European trade.
DEMAND UP
Physical demand remains strong, and scrap selling is scarce,
as market players bet on a further rally in prices, according to
Asian dealers.
Edel Tully, precious metals strategist at UBS, said the
bank's physical sales to India were above the year-to-date
average ahead of Diwali, a key period for Indian gold buying.
"Separately, scrap supply is certainly visible at the
refineries, but we don't believe it is at levels which can on
its own curtail gold rallies," she said in a note.
Meanwhile, spot palladium <XPD=> rose as much as 2.5 percent
to a one-week high of $594.50 an ounce, aided by the weaker
dollar and evidence that investors are continuing to buy into
one of the top performing commodities of 2010.
Outstanding shares in ETF Securities' U.S.-listed palladium
exchange-traded fund, the world's largest palladium ETF, staged
their largest one-day rise in six months on Tuesday, indicating
strong inflows of metal.
With palladium up 45 percent so far this year and close to
its highest in over nine years, the platinum-palladium ratio, or
the number of ounces of palladium used to buy an ounce of
platinum, fell to 2.87, its lowest in more than six years.
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For a graphic on the ratio, click:
http://graphics.thomsonreuters.com/AS/0810/RS_20101310122335.jpg ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Palladium <XPD=> was bid at $589.50 an ounce against $580,
while platinum <XPT=> was at $1,703 an ounce versus $1,675.
(Editing by Sue Thomas)
