* Dollar decline drives gold higher after Fed minutes
* Gold benefits on expected further currency depreciation
* ETF flows into palladium spur 2 pct price gain
* Coming up: Bernanke Q&A at Pittsburgh conf. due 2010 GMT
(Recasts, adds comments, updates prices to market close)
By Frank Tang
NEW YORK, Oct 13 (Reuters) - Gold surged nearly 2 percent
to a record high near $1,375 an ounce on Wednesday, boosted by
worries over currency depreciation after the Federal Reserve
signaled it will resume buying government debt to stimulate the
economy.
It was the biggest percentage gain since Sept. 14 for gold,
which has rallied 25 percent so far this year. Investors have
sought safe havens with the Fed and other central banks
professing readiness to inject more money into the financial
system, a procedure known as quantitative easing.
Silver hit a 30-year peak to approach $24 an ounce, and the
Reuters/Jefferies CRB index <.CRB> -- a barometer for
commodities -- rose above 300 points for the first time in two
years, as the dollar fell broadly. Wall Street rose more than 1
percent on strong bank earnings. []
"Gold is an international currency phenomenon. Around the
world, people are turning disdainful of their own currencies
and everyone else's. So, where do they turn? They turn to the
gold market," Dennis Gartman, a hedge fund manager and
publisher of the Gartman Letter, said.
Spot gold <XAU=> hit an all-time high of $1,374.15 an ounce
and was up 1.5 percent at $1,370.20 an ounce at 2:34 p.m. EDT
(1834 GMT). U.S. December gold futures settled up $23.80 at
$1,370.50.
Silver <XAG=> hit $23.94, its strongest showing since 1980,
and was last up 2.5 percent at $23.87 an ounce.
The dollar remained a main short-term driver of gold. The
currency encountered broad selling pressure after minutes of
the Fed's last policy-setting session made public on Tuesday
bolstered expectations the Fed will move to drive down rates
further by resuming treasury debt purchases as soon as its next
meeting on Nov. 2-3. [] []
The Fed, however, provided no details about the scope of
potential purchases.
Axel Merk, portfolio manager of the Merk Hard Currency Fund
<MERKX.O>, said that the Fed and other central banks are trying
to weaken their currencies to boost economic growth, prompting
investors to turn to gold as an alternative currency.
"With the weaker dollar, inflation will pick up in the
commodity space, which is the most sensitive to monetary
stimulus. So, it's only logical that gold will do very well in
that environment," said Merk, who manages $500 million in
mutual fund assets.
The 25-day correlation between gold and the U.S. dollar was
near a negative 0.6, its most pronounced in six months, Reuters
data showed.
"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.
PHYSICAL BUYING, INDIA SUPPORT
Physical demand in Asia remains strong, and market players
bet on a further rally in prices, dealers said.
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 major Hindu festival and gold-buying
event.
Meanwhile, spot palladium <XPD=> rose as much as 2.5
percent to a one-week high of $594.50 an ounce on the back of
the weaker dollar, as investors continued to pile 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 the 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.
(Graphic: http://link.reuters.com/jet38p )
Palladium <XPD=> was up 1.9 percent to $591 an ounce, and
platinum <XPT=> gained 1.7 percent to $1,704 an ounce.
Prices at 2:40 p.m. EDT (1840 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1370.50 23.80 1.8% 25.0%
US silver <SIZ0> 23.932 0.785 0.0% 42.1%
US platinum <PLF1> 1707.40 24.10 1.4% 16.1%
US palladium <PAZ0> 593.65 13.00 2.2% 45.2%
Gold <XAU=> 1369.70 20.10 1.5% 24.9%
Silver <XAG=> 23.88 0.60 2.6% 41.8%
Platinum <XPT=> 1704.00 29.00 1.7% 16.3%
Palladium <XPD=> 591.50 11.50 2.0% 45.9%
Gold Fix <XAUFIX=> 1365.50 7.00 0.5% 23.7%
Silver Fix <XAGFIX=> 23.53 50.00 2.2% 38.5%
Platinum Fix <XPTFIX=> 1696.00 2.00 0.1% 15.7%
Palladium Fix <XPDFIX=> 587.00 6.00 1.0% 46.0%
(Additional reporting by Amanda Cooper and Jan Harvey in
London; editing by Jim Marshall)
