PRECIOUS-Gold hits record highs as markets eye U.S. easing

                                
 * Dollar ails on expectations of further quantitative easing
                                
 * Main gold, silver ETF assets up; iShares Silver at record
                                
 * Record gold prices lift silver, platinum, palladium
                                
 
                                
 (Updates prices)
                                
 By Jan Harvey
                                
 LONDON, Sept 29 (Reuters) - Gold prices rallied to record
highs in Europe on Wednesday on fears moves by the Federal
Reserve to tackle the sluggish U.S. economy would undermine the
dollar, boosting investment in bullion as an alternative asset.
                                
 Spot gold <XAU=> hit a record $1,313.20 and was bid at
$1,309.45 an ounce at 1116 GMT, against $1,307.40 late in New
York on Tuesday. U.S. gold futures for December delivery <GCZ0>
rose $2.60 an ounce to $1,310.90.
                                
 Gold's strength also lifted other precious metals, with
silver reaching a fresh 30-year peak, palladium its highest
level since March 2008 and platinum a four-month high.
                                
 "Gold is flying because of concerns over a weakening dollar,
and the prospect of quantitative easing," said David Wilson, an
analyst at Societe Generale. "Our internal house view is for a
slight softening of the dollar over the next 3-6 months."
                                
 "We are not convinced the European economy is going to be
doing particularly well next year either," he added. "It is
going to be a kind of competition (to show) who will be worse
out of the two."
                                
 The dollar fell 0.3 percent against a basket of six other
currencies on Wednesday <.DXY> as falling U.S. Treasury yields
and below-consensus U.S. data increased expectations the Fed
would take further steps towards quantitative easing. [FRX/]
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 For a graphic showing the relationship between quantitative
easing expectations, the dollar, and gold, click on:
http://graphics.thomsonreuters.com/F/09/GLD_IRDLR0910.gif
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 The U.S. currency fell to a five-month low against the euro
<EUR=> and a two-year trough against the Australian dollar.
                                
 "The backdrop for the dollar continues to deteriorate,"
JPMorgan said. "The increased focus on QE and the break of
several key dollar support levels maintained the overall bearish
bias." The bank advised selling into any signs of strength.
                                
 
                                
 INVESTMENT STRONG
                                
 Buying in India, the world's biggest gold consumer, rose on
Wednesday despite the hike in spot prices, as strength in the
rupee helped shield local buyers from the rise. [ID:nSGE68S0A0]
                                
 Scrap sales have also slowed after prices retreated from
their rupee peak, with sellers waiting for prices to breach the
20,000-rupee level from around 19,100 rupees currently.
                                
 Investment interest in gold was also firm, with holdings of
the world's largest gold-backed exchange-traded fund, New York's
SPDR Gold Trust <GLD>, climbing just over five tonnes on
Tuesday. [GOL/SPDR]
  <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
                                
 For a graphic showing gold's price performance adjusted for
inflation, click on: http://r.reuters.com/nym54p
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 Holdings of the largest silver ETF, the iShares Silver Trust
<SLV>, also rose on Tuesday, climbing 143 tonnes to a record
high of 9,756 tonnes. [ID:nSGE68S00Z]
                                
 Silver prices <XAG=> responded my marking another 30-year
high at $22.00 an ounce, before easing back to $21.84 an ounce
against $21.69. Gains in silver are outstripping those of gold.
                                
 "The ratio of gold to silver dropped below 60 for the first
time in 11 months," said Fairfax analyst John Meyer.
                                
 "Silver has outperformed gold since the end of June, gaining
17 percent compared with gold's 5.4 percent climb, as investors
bought on the back of the metals relative cheapness."
                                
 Palladium <XPD=> was the biggest climber of the precious
metals on Wednesday, rising 2.5 percent to a 2-1/2 year high at
$571 an ounce, before slipping back to $564.03 versus $557.15.
The autocatalyst metal is rising on hopes demand will improve.
                                
 "The palladium story is pretty bullish on what we have seen
in the auto sector so far this year, and the heightened sense
that Russian government stockpiles are going to have little
influence in the next year in terms of capping rallies," said
Societe Generale's Wilson.
                                
 Platinum <XPT=> reached its highest since May at $1,650.50,
and was later at $1,643.10 an ounce against $1,631.65.
 (Editing by Sue Thomas)