* Dollar index hits 2010 low, prompts safe-haven buying
* SPDR gold ETF reports further decline in holdings
* Silver hits 30-year peak, palladium highest since 2001
* Coming up: U.S. CPI, consumer sentiment reports due Fri.
(Recasts, adds comment, updates prices to market close)
By Frank Tang
NEW YORK, Oct 14 (Reuters) - Gold extended its record-breaking
rally to a second day on Thursday as the dollar slumped to its
lowest level this year, prompting investors to buy the metal as a
hedge against currency depreciation.
Silver also hit a 30-year peak for a second straight session,
rising above $24 an ounce, as precious metals gained broadly after
data showed new U.S. claims for jobless benefits rose last week,
hardening the view the Fed will resume buying government debt to
stimulate economic growth. [].
The world's largest gold-backed exchange traded fund, however,
reported further outflows in October, signaling possible
exhaustion of investor interest, analysts said.
"Gold benefits from the persistent rise of foreign currencies
against a weaker dollar. Since the dollar is the proxy for U.S.
gold prices, the metal is expected to gain further as the dollar
goes lower," said Adam Klopfenstein, senior market strategist at
Lind-Waldock, a unit of MF Global.
Also boosting gold's underlying demand are growing concerns
over the handling of U.S. home foreclosures, which could harm the
fragile housing market and broader economy if the issue escalates,
analysts said.
Bank shares were hard hit and Wall Street dropped nearly 1
percent on the back of foreclosure woes. [] []
Spot gold <XAU=> hit a high of $1,387.10 an ounce and was
trading up 0.6 percent at $1,378.80 an ounce at 4:02 p.m. EDT
(2002 GMT). Gold prices have risen more than 25 percent this
year.
U.S. December gold futures <GCZ0> settled up $7.10 at
$1,377.60 an ounce. COMEX gold futures volume was a busy 184,600
lots, 33 percent above the 30-day average.
The U.S. dollar index <.DXY>, which measures the dollar's
performance against a basket of six major currencies, fell to its
lowest level this year. The Australian dollar flirted with parity
as selling in the greenback spread after Singapore widened its
currency trading band. []
Gold, which is denominated in dollars, tends to move in the
opposite direction to the U.S. currency. The correlation between
bullion and the U.S. currency has increased to a negative 0.54,
near its strongest inverse relationship in 5 months.
(Graphic:http://link.reuters.com/gyk58p)
GOLD ETF SEES OUTFLOW
Interest in gold-backed exchange-traded funds showed signs of
fading, with holdings of the world's largest, SPDR Gold Trust
<GLD>, declining further on Wednesday. They have fallen some 19.5
tonnes since the end of September. []
Lind-Waldock's Klopfenstein said the outflow in SPDR Gold
could be related to selling and increased volatility ahead of an
option expiration of the ETF on Friday.
Decent physical buying in the metal's biggest consumer India
ahead of Hindu festivals such as Diwali, a major gold-buying
event, is offseting weaker investment buying, Klopfenstein said.
On a positive note, Swiss bank UBS raised its one-month
forecast for gold to $1,425 an ounce from $1,300, saying it sees
limited downside potential for gold ahead of the Fed's November
meeting.
Silver <XAG=> set a 30-year high at $24.90 an ounce and was
trading up 2.7 percent at $24.56.
Among other precious metals, palladium rallied to a fresh
nine-year high at $603 an ounce, lifted by strength in gold,
dollar weakness and improving auto demand.
Palladium <XPD=> was further trading up 1.7 percent at
$600.50, while platinum <XPT=> gained 0.4 percent at $1,709 an
ounce.
Prices at 4:04 p.m. EDT (2004 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCZ0> 1377.60 7.10 0.5% 25.7%
US silver <SIZ0> 24.435 0.503 0.0% 45.1%
US platinum <PLF1> 1712.60 5.20 0.3% 16.4%
US palladium <PAZ0> 601.55 7.90 1.3% 47.1%
Gold <XAU=> 1379.00 8.10 0.6% 25.8%
Silver <XAG=> 24.56 0.67 2.8% 45.8%
Platinum <XPT=> 1709.00 6.75 0.4% 16.6%
Palladium <XPD=> 600.50 10.05 1.7% 48.1%
Gold Fix <XAUFIX=> 1373.25 -7.50 -0.5% 24.4%
Silver Fix <XAGFIX=> 24.49 96.00 4.1% 44.1%
Platinum Fix <XPTFIX=> 1708.00 5.00 0.3% 16.5%
Palladium Fix <XPDFIX=> 598.00 3.00 0.5% 48.8%
(Additional reporting by Jan Harvey in London; editing by Jim
Marshall)
