* Firm dollar prompts investor profit taking after record hit
* SPDR unchanged but silver ETF renews peaks
* Improving supply/demand balance supports gold
By Chikako Mogi
TOKYO, Nov 20 (Reuters) - Gold firmed on Friday, erasing early
losses as buying momentum for dollar petered out, with bullish
sentiment that had pushed it to record highs above $1,150 earlier
in the week still intact.
At current market levels, gold is set for a weekly gain of
about 2 percent, a third straight week of rises.
Bullion has notched up successive record highs this month,
underpinned by a number of central bank gold purchases earlier in
the month, including India's acquisition of 200 tonnes of the
precious metal from the International Monetary Fund.
Drops in U.S. equities on growing caution about the U.S.
economic outlook may also have helped highlight gold's safe-haven
appeal, adding to the bullish sentiment.
"Underlying sentiment remains good in the gold market," said
Ben Westmore, commodity economist at National Australia Bank.
"The financial crisis has caused a structural shift in
investment behaviour, with market participants now holding a
greater preference for less opaque assets where the underlying
asset is well defined. This continues to buoy sentiment around
gold," he said.
Spot gold <XAU=> briefly fell below $1,140 earlier but inched
up 0.1 percent to $1,144.55 per ounce as of 0611 GMT, compared to
New York's notional close of $1,143.50. Spot gold hit a record
$1,152.75 an ounce on Wednesday.
U.S. gold futures for December delivery <GCZ9> edged up 0.3
percent to $1,144.8 per ounce compared to $1,141.90 an ounce on
the NYMEX. Futures hit a record high of $1,153.40 on Wednesday.
Traders have said prices also got a boost from the elevated
levels of call options, or rights to buy, for U.S. December gold
futures.
Investors remained wary of substantial amounts of open
positions remaining in call options with a strike price of $1,200
due to expire next Monday, which could sharply boost volatility
<0#GCc1++>.
Some analysts said gold's rally was bound to spur
profit-taking, but losses are likely to be limited as investors
have been eager to buy back gold as soon as prices ease, keeping
the uptrend long-lasting regardless of movements in the dollar.
"Gold is moving on its own factors now, away from the
currency, supported by improving supply and demand balances,
including central bank purchases and less recycling despite high
prices," said Koichiro Kamei, managing director at financial
research firm Market Strategy Institute in Tokyo.
A World Gold Council report released on Thursday showed that
supplies to the market of recycled gold rose 31 percent to 283
tonnes in the third quarter. But that was down from 314 tonnes in
the second quarter and also a drop from 569 tonnes in the first
quarter of 2009. []
The WGC also said on Thursday that only a "negligible" 1.5
tonnes of gold had been sold by signatories of the Central Bank
Gold Agreement in the year starting Sept. 27. []
Traders said sentiment was also boosted by a report that
billionaire hedge fund manager John Paulson was launching a new
gold fund using $250 million of his own money. []
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings stood at 1,117.493
tonnes as of Nov. 19, unchanged from the previous day. []
The world's largest silver-backed exchange-traded fund, the
iShares Silver Trust <SLV>, said its bullion holdings rose 94.73
tonnes or 1.05 percent from the previous day to a fresh record
9,116.04 tonnes as of Nov. 19. []
Silver prices could rise above $20 an ounce in the short
term, as a surge in investment buying should more than offset a
drop in fabrication demand, precious metals consultancy GFMS said
on Thursday. []
The greenback eased after keeping gains earlier on Friday
when investors took profits from gains made in the past months in
risk assets including higher-yielding currencies. []
Precious metals prices at 0610 GMT
Metal Last Change Pct chg YTD pct chg Turnover
Spot Gold 1144.50 1.00 +0.09 30.03
Spot Silver 18.53 0.02 +0.11 63.69
Spot Platinum 1437.00 -4.50 -0.31 54.18
Spot Palladium 364.00 -2.00 -0.55 97.29
TOCOM Gold 3283.00 -5.00 -0.15 27.59 55067
TOCOM Platinum 4119.00 -22.00 -0.53 55.32 15206
TOCOM Silver 531.50 -0.50 -0.09 66.46 443
TOCOM Palladium 1051.00 -10.00 -0.94 91.09 191
Euro/Dollar 1.4923
Dollar/Yen 88.86
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
