* Gold prices hit record high at $1,036.40/oz
* Dollar slides after report oil pricing may diversify
* SPDR gold ETF holdings rise for second successive day
(Updates with record, adds comment)
By Jan Harvey
LONDON, Oct 6 (Reuters) - Gold hit a record high at
$1,036.40 an ounce as the dollar dropped on a report, later
denied, that Gulf Arab states were considering abandoning the
U.S. currency for oil trade.
A positive technical picture for gold fuelled buying on the
fund side, traders said. However, the weight of near-record long
positions in New York gold futures still leaves the market
vulnerable to correction.
Spot gold <XAU=> was bid at $1,032.05 an ounce at 1319 GMT
against $1,016.65 late on Monday.
U.S. gold futures <GCc2> also hit an all-time high, with
gold futures for December delivery <GCZ9> on the COMEX division
of the New York Mercantile Exchange hitting a peak of $1,038.00
an ounce. They were later up $16.10 at $1,033.90.
"Investors (and) funds keep buying as the technical side
looks good," said senior Commerzbank trader Michael Kempinski.
"Even without the weak U.S. dollar, gold is performing quite
well."
Gold also hit six-month highs when priced in sterling
<XAUGBP=R> and euros <XAUEUR=R>, breaking above 700 euros an
ounce for the first time since early April.
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 soft. []
Dollar weakness, if sustained, could push gold prices to new
all-time highs above the peak they hit in March last year,
analysts said.
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."
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 said they were also seeing rising demand in India,
the largest consumer of gold last year, ahead of the Diwali
festival on Oct. 19. []
Mark Cutifani, chief executive of AngloGold Ashanti
<ANGJ.J>, said he saw gold prices at $950-1,100 an ounce in the
next 12 months, and they could break $1,100 if the U.S. economy
continued to dip and investment demand rises. []
The yellow metal's gains helped lift silver to a near
two-week high of $17.21 an ounce as investors bought it as a
cheaper proxy for gold. Silver <XAG=> was later at $17.11 an
ounce against $16.59.
Platinum, the precious metal widely used in autocatalyst
manufacturing, also benefited from gold's climb, as well as the
better appetite for risk demonstrated by rising equity markets.
[]
Platinum <XPT=> was at $1,305 an ounce against $1,293 while
palladium <XPD=> was at $299 against $298.50.
(Reporting by Jan Harvey; Editing by William Hardy)
