* Dollar slides on report oil pricing will diversify
* Gold prices eye record high at $1,030.80/oz
* SPDR gold ETF holdings rise for second successive day
(Updates with 18-month high)
By Jan Harvey
LONDON, Oct 6 (Reuters) - Gold rallied to an 18-month high
on Tuesday as a report that Gulf Arab states were considering
pricing oil in a currency other than the dollar knocked the U.S.
unit, boosting interest in the metal as an alternative asset.
A small seasonal increase in demand for physical gold is
also supporting prices, traders said. []
Spot gold <XAU=> hit a peak of $1,025.70 an ounce and was
bid at $1,024.20 an ounce at 1028 GMT against $1,016.65 late in
New York on Monday.
U.S. gold futures <GCc2> also hit an 18-month high. Gold
futures for December delivery <GCZ9> on the COMEX division of
the New York Mercantile Exchange rose to a peak of $1,029 an
ounce and were later up $8.70 to $1,026.50.
Peter Fertig, a consultant at Quantitative Commodity
Research, said the final quarter was typically strong for gold,
due to rising jewellery demand -- a weaker than usual factor
this year -- and as the dollar is seasonally soft.
"That is the major driver of investment demand," he said.
"The speculation, even if it has been denied, that Gulf
states would like to peg oil prices to a currency basket and not
the U.S. dollar alone has been a positive factor for gold, while
weakening the dollar against other major currencies."
The dollar slipped sharply in Asian trade after UK newspaper
the Independent said Gulf Arab states were in secret discussions
to end the use of dollars in oil trading. []
The newspaper said the states were in talks with Russia,
China, Japan and France to replace the unit with a basket of
currencies. The dollar pared losses after the report was denied
by Saudi and Russian authorities, but stayed weak. []
Dollar weakness, if sustained, could push gold prices to new
all-time highs above $1,030.80, the peak they hit in March last
year, analysts said.
"The ability of gold to climb back over $1,000 is, in our
opinion, impressive," HSBC analyst Jim Steel said in a note.
"If the dollar remains subject to gradual erosion and
commodity prices remain firm.... then gold is likely to remain
well-bid and may challenge all-time highs."
COMMODITIES CLIMB
Among other commodities, oil and base metals climbed on the
back of the U.S. currency weakness, which makes dollar-priced
assets cheaper for holders of other currencies. Strength in
other commodities is often reflected in gold. [] []
Physical demand for the metal also trickled through. The
largest gold exchange-traded fund, New York's SPDR Gold Trust
<GLD>, said its holdings rose 1.5 tonnes on Monday. []
Traders say they are also seeing rising demand in major gold
consumer India ahead of the Diwali festival on Oct. 19.
Mark Cutifani, chief executive of AngloGold Ashanti
<ANGJ.J>, said he sees gold prices at $950-1,100 an ounce in the
next 12 months, and they could break $1,100 if the U.S. economy
continues to dip and investment demand rises. []
The yellow metal's gains helped lift silver to a near
two-week high of $16.92 an ounce in early trade as investors
bought it as a cheaper proxy for gold. Silver <XAG=> was later
at $16.95 an ounce against $16.59.
Platinum and palladium, the precious metals widely used in
autocatalyst manufacturing, also benefited from gold's rise, as
well as the better appetite for risk demonstrated by rising
equity markets. []
Platinum <XPT=> was at $1,303.50 an ounce against $1,293
while palladium <XPD=> was at $297.50 against $298.50.
(Reporting by Jan Harvey; Editing by Anthony Barker)
