* Gold eyes 18-month high as the dollar weakens
* Federal Reserve in focus for impact on the dollar
* COMEX long positions, lack of physical buying could cap
(Recasts, adds quotes, updates closing prices, adds second
byline, dateline, pvs LONDON)
By Frank Tang and Humeyra Pamuk
NEW YORK/LONDON, Sept 22 (Reuters) - Gold climbed more than
1 percent on Tuesday to trade within striking distance of
recent 18-month highs, as a tumbling dollar stirred investment
buying ahead of an interest-rate decision by the U.S. Federal
Reserve.
While the market had picked up after briefly falling below
$1,000 an ounce on Monday, analysts said some investors
remained hesitant to buy aggressively until the Fed announces
the outcome of its meeting on Wednesday. []
Most are seeking signals the U.S. central bank will keep
monetary policy loose well into 2010.
"The market is looking for any sense of a change in speed
or direction from the (Fed). If we come past that press
conference tomorrow and the market decides its business as
usual...it's another green light to sell the dollar and another
up-leg for gold," said Mitsubishi analyst Tom Kendall.
Further dollar weakness after the meeting could trigger a
rally which could send bullion above its 18-month high of
$1,023.85 an ounce hit last week, and to within sight of the
$1,030.80 an ounce record high struck in March 2008.
U.S. December gold futures <GCZ9> settled up $10.60, or 1.1
percent, at $1,015.50 an ounce on the COMEX division of New
York Mercantile Exchange.
Spot gold <XAU=> hit an intraday high of $1,019.50 an
ounce. It was at $1,013.25 at 2:32 p.m. EDT (1832 GMT), versus
$1,002.55 an ounce late in New York on Monday.
The euro rose above $1.48 for the first time in a year, and
the dollar index <.DXY> fell nearly 1 percent against other
major currencies as dealers took advantage of deteriorating
sentiment toward the dollar to target options barriers at that
level.[]
Frank Holmes, CEO and chief investment officer of
commodities-focused fund manager U.S. Global Investors, said
gold's ascent was largely driven by the dollar's weakness.
A weaker greenback makes dollar-priced gold less expensive
for non-U.S. investors. Gold is also a popular alternative
investment when monetary and fiscal policy is loose.
"We still have a deflationary economy...but gold can still
go up with that because of devaluation of currencies due to
countries' deficit spending and a need to keep real interest
rates negative," Holmes said.
LIQUIDATION PRESSURE?
However, traders worried about potential large liquidation
of record long positioning on the New York COMEX futures market
could threaten the sustainability of prices.
"I'm bullish but I think we need a more substantial
correction than the one we saw yesterday," said Afshin Nabavi,
head of trading at MKS Finance.
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.
In other metals, silver <XAG=> rose to $17.07 an ounce
compared with Monday's late quote of $16.80, while palladium
<XPD=> was at $300 an ounce versus $294.50 an ounce. It hit
$304 an ounce last week, its highest since end-August 2008.
Platinum <XPT=> was at $1,329 an ounce compared with its
previous finish of $1,315.50 an ounce.
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCZ9> 1015.50 10.6 1.1 884.3 14.8
US silver <SIZ9> 17.115 0.235 1.4 11.295 51.5
US platinum <PLV9> 1339.20 17.00 1.3 941.50 42.2
US palladium <PAZ9> 302.40 3.25 1.1 188.70 60.3
Prices at 2:32 p.m. EDT (1832 GMT)
Gold <XAU=> 1013.35 10.80 1.1 878.20 15.4
Silver <XAG=> 17.07 0.27 1.6 11.30 51.1
Platinum <XPT=> 1329.00 13.50 1.0 924.50 43.8
Palladium <XPD=> 300.00 5.500 1.9 184.50 62.6
Gold Fix <XAUFIX=> 1014.00 -1.75 -0.2 836.50 21.2
Silver Fix <XAGFIX=> 17.24 56.00 3.4 14.76 16.8
Platinum Fix <XPTFIX=> 1330.00 3.00 0.2 1529 -13.0
Palladium Fix<XPDFIX=> 302.00 4.00 1.3 365.0 -17.3
(Additional reporting by Veronica Brown in London)
