* Gold supported as dollar index hits 14-mth low, euro
climbs
* SPDR Gold holdings unchanged, iShares Silver inches up
* Indian festivals keeping some buying interest alive
By Chikako Mogi
TOKYO, Oct 14 (Reuters) - Spot gold and futures hit record
highs on Wednesday as the dollar extended losses to a 14-month
low against a basket of currencies on growing optimism about
the global economy.
Spot gold <XAU=> hit a peak of $1,069.45 per ounce, taking
gains since the start of September alone to 13 percent, while
the most-active December gold futures <GCZ9> rose to a high of
$1,071.10.
The dollar is pressured by expectations of continued low
U.S. interest rates, prompting investors to buy higher-yielding
currencies and assets including commodities, pushing oil to its
highest in nearly a year above $75 a barrel on Wednesday.
Gold has benefited from the dollar's weakness which makes
bullion more affordable for non-dollar holders, as well as
fears that current global monetary easing will stoke severe
inflation.
"There is a self-sustaining momentum in the market, taking
its cues from dollar weakness to use gold as a currency
alternative, with the macroeconomic environment also lending
support," said Koichiro Kamei, managing director at financial
research firm Market Strategy Institute.
Despite gold hitting a new record, it is far from an
inflation-adjusted record, which analysts at GFMS have put as
high as $2,079 per ounce.
The market rally comes at a time when speculative net long
futures positions hit an all-time high in the week ended Oct.
6, suggesting growing risks for these long positions to be
cleared and making an eventual sharp price correction
increasingly likely.
"Ironically, wariness about these net long futures
positions has prevented the rally from becoming overheated. But
because price rises have been gradual, investors who thought
they missed out on buying are continuously drawn to the market,
making the rally slow but sustainable," Kamei said.
At 0530 GMT, spot gold, which hit a previous high only a
day before, was trading at $1,067.85, up 0.4 percent from the
U.S. close.
"The key is still the dollar's movement and if it continues
to head lower then there's more room for gold to make new
highs," said Adrian Koh, an analyst at Phillip Futures in
Singapore.
The dollar index fell below 75.60 <.DXY> to its lowest
since August 2008, while the euro climbed to a fresh 14-month
high of $1.4891 as investors bet on higher-yielding currencies
and commodities on growing optimism about the global economy.
[]
Asian stocks were generally higher but traders were
cautiously awaiting earnings reports from key U.S. companies
later in the week for clues to the state of the economy.
"Many players are sidelined, but those who can still buy at
these levels are preventing the market from easing," said
Yuichi Ikemizu, Tokyo branch manager for Standard Bank. He said
there were two-way flows on the physical side, with sellers
being met by some purchasing interest for Indian religious
festivals.
More gold scrap entered the physical market on Tuesday as
bullion hovered near all-time highs, while last-minute
purchases by Indian consumers ahead of the festivals kept
premiums steady in Asia. []
Some have expressed concern about the weakness of physical
demand, which together with investment demand has been a major
pillar driving gold prices higher over the past few years.
Paul Walker, chief executive at metals consultancy GFMS,
cast doubt on the sustainability of current levels of gold
prices.
"My concern is that this market is becoming increasingly
unidimensional," Walker said at a seminar in Tokyo on Tuesday.
"One pillar, jewellery demand, has become eroded."
[]
Reflecting a cautious investor stance, the world's largest
gold-backed exchange-traded fund, SPDR Gold Trust <GLD>, said
its holdings stood at 1,109.314 tonnes as of Oct. 13, unchanged
from the previous business day. []
But the world's largest silver-backed exchange-traded fund,
iShares Silver Trust <SLV>, said its bullion holdings rose
18.35 tonnes or 0.2 percent from the previous day to 8,612.57
tonnes on Tuesday.
Gold's rally pulled other precious metals higher on
Tuesday. Silver <XAG=> rose above $18 an ounce for the first
time since July 2008, to $18.01. Silver was at $17.92 on
Wednesday. Platinum <XPT=> hit a 13-month high of $1,361.50 on
Tuesday and stood at $1,359.0 on Wednesday.
Precious metals prices at 0530 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 1067.85 4.50 +0.42 21.33
Spot Silver 17.93 0.18 +1.01 58.39
Spot Platinum 1359.00 0.50 +0.04 45.82
Spot Palladium 329.00 3.50 +1.08 78.32
TOCOM Gold 3068.00 5.00 +0.16 19.24
51438
TOCOM Platinum 3902.00 4.00 +0.10 47.13
11570
TOCOM Silver 512.50 -2.30 -0.45 60.51
605
TOCOM Palladium 944.00 -20.00 -2.07 71.64
431
Euro/Dollar 1.4878
Dollar/Yen 89.05
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Lincoln Feast)
