* Gold at new record highs just below $1,350.00
* Palladium at 9 year highs.
(Updates with comment, refreshes prices)
By Amanda Cooper
LONDON, Oct 6 (Reuters) - Gold rose to record highs for a
second day in a row on Wednesday as investors punished the
dollar ahead of the Federal Reserve's possible resumption of
special measures to protect the flagging economy.
Palladium rallied to its highest level in over nine years,
fuelled by optimism over the potential for strong growth in
demand from the auto industry.
Gold has touched all-time highs in eight out of the last 10
trading sessions, fuelled by the decline in the dollar, which is
now at eight-month lows against the euro <EUR=>, which has
profited from weakness in the U.S. currency and from the
European Central Bank giving no hint that it could ease policy.
Spot gold <XAU=> rose as high as $1,349.80 an ounce earlier
in the day, before easing back to $1,345.80 by 1430 GMT, still
up from $1,338.70 late in New York on Tuesday.
U.S. gold futures <GCZ0> also hit a fresh all-time high of
$1,351 an ounce and traded up $6.6 at $1,346.80 an ounce.
While gold has hit new highs in dollar terms, this strength
has not been replicated in the major gold crosses, reflecting
the resilience of the euro <EUR=>, <JPY=> and Swiss franc <CHF=>
against the greenback.
"Considering what is going on, (the price) is justified and
dollar weakness is really the big driver right now," said Ole
Hansen, senior manager at Saxo Bank. "If you look at gold in
euro terms, it's still trading sideways. It's not as if it's
really having a life of its own."
The dollar hit 15-year lows against the yen on Wednesday and
an 8-1/2 month low against a basket of currencies <.DXY>, dented
by expectations the Fed will take steps to keep monetary policy
as loose as possible, which would erode the return on
dollar-denominated deposits for non-U.S. investors.
CURRENCY MOVES
In dollar terms, gold is up 2.8 percent so far this month,
while euro-priced gold <XAUEUR=> is up 1.1 percent,
yen-denominated gold <XAUJPY=> is up 2.2 percent and Swiss
franc-priced gold <XAUCHF=R> is up 0.95 percent.
"We've seen this huge move in the euro because, essentially,
it's thought the U.S. will do more quantitative easing, the ECB
is trying to pull back from that and headlines such as 'IMF
warns of currency wars' is all grist for the mill for gold
really," said Matthew Turner, analyst at Mitsubishi.
International Monetary Fund Director Dominique Strauss-Kahn
said in comments published on the FT website on Tuesday that
countries risk undermining the global economic recovery if they
use their currencies to boost domestic growth. []
Economic uncertainty and, primarily, a weak dollar have
helped gold rally 8 percent from a month earlier and 23 percent
so far this year. Traders and analysts expected the momentum to
stay after a surprise interest rate cut from the Bank of Japan
fuelled anticipation of more monetary easing from the Fed.
[]
On the physical market, there was light scrap selling from
Thailand and short-covering from speculators, according to a
Singapore-based dealer, while in top consumer India the strength
of the local currency tempered demand. []
Spot silver <XAG=> rose to a fresh 30-year high of $23.06 an
ounce, before easing to $22.85 still showing a gain on the day
after Tuesday's notional close at $22.78.
Investor interest in silver continued to rise. Holdings in
the iShares Silver Trust <SLV>, the world's largest
silver-backed exchange-traded fund, rose 94.32 tonnes to a new
all-time high of 9,877.20 tonnes by Oct 5.
Platinum group metals rose along with gold.
Palladium <XPD=> rallied to its highest since July 2001,
having hit a session peak at $591.50 an ounce, before paring
some gains to trade at $584.50, up from $574.60 the day before.
Constrained supply and roaring demand from auto markets in
the emerging world, and in particular China, have pushed the
price of palladium up by over 45 percent this year.
"It's a mixture of optimism about developing markets, also a
feeling that a double-dip recession has been avoided maybe,"
said Mitsubishi's Turner. "I think perhaps also you're seeing
this belief that if you get currency wars and QE, then real
assets are the way forward, so it's a dollar move as well."
Platinum <XPT=> hit $1,705.50 an ounce, highest since
mid-May, before easing to $1,700.00, from $1,693.75.
(Editing by Sue Thomas)
