* US dollar, pound fall on economic stimulus hope
* Gold touches record high on flight-to-safety bid
* Stocks rise before end of quarter
(Updates with U.S. markets' close)
By Manuela Badawy
NEW YORK, Sept 28 (Reuters) - The U.S. dollar and the
British pound fell against the euro on Tuesday as speculation
rose those countries' central banks would provide more stimulus
to their economies, which sent gold to record highs.
The euro surged to a five-month high against the greenback
and to a four-month high against the pound on expectations the
Federal Reserve and the Bank of England were likely to pump
more money into their anemic economies, a process known as
quantitative easing.
Gold futures rose to $1,310 an ounce and silver hit a
30-year high as a weaker-than-forecast U.S. consumer confidence
reading and a report that U.S. home prices dipped in July
boosted the precious metals' safe-haven appeal.
European stocks fell after the early U.S. data showing
weakness while Wall Street closed higher as investors rushed to
buy up stocks with strong performance and positive outlooks to
avoid missing out on the 9 percent rally in September,
typically the year's worst month for stocks.
"For lack of a better term, it really is a 'classic QE
day,'" said Tom Fitzpatrick, chief technical strategist at
Citigroup in New York. "Bonds rally, equities rally, the dollar
goes down and gold hits new highs. At this point, that is
what's driving the markets."
The Fed is likely preparing a fresh round of quantitative
easing measures to announce at the end of its Nov. 2-3 meeting,
hedge fund adviser Medley Global Advisors said in a report on
Tuesday, a market source told Reuters. [].
The Fed is also weighing a more open-ended, smaller-scale
bond buying program, the Wall Street Journal reported.
The Bank of England's Adam Posen became the first of the
central bank's policymakers since November to urge more credit
easing for Britain in order to avoid the kind of slump Japan
experienced in the 1990s. [].
"The growing realization that ultra loose monetary policies
may debase currencies is leading to continuing safe-haven
demand for gold," analysts at GoldCore said in a note.
The weak U.S. dollar and low bond yields reflect falling
investor confidence in the strength of the recovery, analysts
said.
Gold for December delivery <GCZO> reached an all-time high
of $1,311.80 an ounce before slipping back to settle at
$1,308.30, a rise of $9.70. Silver <XAG=> rose to $21.65, a
three-decade high on the spot market after the U.S. data.
The Conference Board's index of consumer attitudes fell to
48.5 in September from a revised 53.2 in August, pressured by a
weak labor market and business conditions. []
U.S. home prices also dipped in July, hovering above
multiyear lows according a Standard & Poor's/Case-Shiller home
price report. []
On Wall Street, the Dow Jones industrial average <>
closed higher 46.10 points, or 0.43 percent, at 10,858.14. The
Standard & Poor's 500 Index <.SPX> gained 5.54 points, or 0.49
percent, at 1,147.70. The Nasdaq Composite Index <> rose
9.82 points, or 0.41 percent, at 2,379.59.
"When a month takes you by a surprise like this, you tend
to be underexposed to stocks and overexposed in cash and
bonds," said Marc Pado, U.S. market strategist at Cantor
Fitzgerald & Co in San Francisco.
The December futures contract for the Nikkei 225 stock
index <0#NK:> trading in Chicago fell 40 points to 9,515.
MSCI world equity index <.MIWD00000PUS> rose 0.33 percent
and the Thomson Reuters global stock index <.TRXFLDGLPU> gained
0.40 percent.
The FTSEurofirst 300 index <> closed 0.3 percent
lower as investors shed riskier assets, while emerging stocks
<.MSCIEF> gained 0.07 percent.
The euro <EUR=> was up 1.00 percent at $1.3588. Against
sterling, the euro rose to around 85.98 pence from around 84.92
pence <EURGBP=D4>.
Sterling <GBP=> fell 0.2 percent to $1.5795 as investors
bet there was an increased chance the BoE would expand its
program of 200 billion pounds of quantitative easing.
Against the Japanese yen, the dollar <JPY=> was down 0.46
percent at 83.87 from a previous session close of 84.260.
The prices of U.S. Treasury debt rose as the latest data
showing another drop in home prices and weaker consumer
confidence added to expectations for more Fed support.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
18/32, with the yield at 2.4671 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 1/32, with the yield at
0.4339 percent. The 30-year U.S. Treasury bond <US30YT=RR> was
up 38/32, with the yield at 3.6588 percent.
(Additional reporting by Steven C. Johnson, Angela Moon in New
York and Maytaal Angel in London; Editing by Kenneth Barry)
