* Gold hits record above $1,290 an ounce
* iShares silver holdings see biggest inflow in 10 months
* Premiums in Singapore, HK steady despite record highs
* Coming up: U.S. FHFA Home price for July; 1400 GMT
(Updates prices; adds graphic)
By Amanda Cooper
LONDON, Sept 22 (Reuters) - Gold rose for a third day on
Wednesday to hit record highs after the Federal Reserve signalled
it stood ready to inject fresh cash into the economy, knocking
the dollar and whetting investor appetite for bullion.
Silver edged closer to its highest in 30 years, against a
backdrop of investors seeking cheaper safe-haven assets, which
was reflected in the largest one-day inflow of metal into the
iShares Silver Trust in 10 months.
Global equities and government bond prices rose after the
Fed on Tuesday laid the groundwork for further stimulus measures
and expressed concerns about low inflation, yet made no policy
shift at the end of a one-day meeting. []
Spot gold hit a new record of $1,294.95 an ounce, before
easing to $1,291.70 an ounce by 1215 GMT, still showing a 0.5
percent gain on the day. U.S. gold futures <GCZ0> rose $19.4 an
ounce to $1,293.70, having hit a contract high at $1,296.5.
"The key driver was the (Federal Reserve) .... statement and
the subtle change in language that it was "prepared to provide
additional accommodation if needed" a shift from the previous
wording that it "will employ its tools as necessary'," said
Credit Agricole analyst Robin Bhar.
"We interpret this as a conditional easing bias. It pushes
the door for QE2 (a second round of quantitative easing) wider
and the implication that this has for a weaker dollar and
further unease of what governments will do to weaken their
currencies to support flagging economic growth."
MORE APPEAL
Should the Fed resort to a second round of quantitative
easing, which involves large-scale purchases of Treasuries to
keep interest rates low in exchange for a cash injection into
the system, gold's appeal to investors grows as the opportunity
cost of holding a non-yield bearing asset declines.
Also, fresh cash in the economy raises the risk of a pick-up
in inflation, which erodes the returns from currency, equity and
bonds holdings, yet benefits owners of gold, who see the value
of their holdings rise in line with consumer prices.
Gold has risen by over 17 percent this year, as investors
have sought a relatively safe asset in which to park their cash
as major currencies, stocks and bonds have become increasingly
volatile.
But large investor positions in gold, as reflected by
holdings of metal under the SPDR Gold Trust <GLD>, the world's
largest exchange-traded fund, and open interest in U.S. futures
<0#GC:> puts gold at the risk of a downward correction.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic on inflows and outflows from the two largest gold
and silver exchange-traded funds in 2010 click on the following
link: http://graphics.thomsonreuters.com/F/09/CMD_GLDETF0910.gif
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
"The market looks overextended to me. People are
predominantly long and keen to see higher prices, and as such,
no one is going to stand in the way," said Simon Weeks, head of
precious metals at ScotiaMoccatta.
"Once we've settled down a bit, I think further gains from
here towards $1,300 are going to be tough. Having said that -- I
hate the cliche -- but the trend has very much been people's
friend of late."
On the physical market, premiums in Hong Kong and Singapore
were little changed despite high prices, with those in Singapore
being around 50 to 80 cents, a dealer based in the city said.
"I reckon customers are recovering from the aftershock of
$20 jump. Again it's a mixed market -- in Thailand we see both
physical demand and scrap selling, while Indonesian clients have
gone hiding this morning and nothing is seen from India so far,"
said the dealer.
Silver prices broke above $21.00 an ounce to their highest
since March 2008 and remained within a hair's breadth of highs
not seen since October 1980.
Holdings in the iShares Silver Trust jumped 127.81 tonnes,
the biggest gain in nearly 10 months, to 9,509.55 tonnes.
Spot silver <XAG=> was last at $21.04, up 0.5 percent on the
day, and set for a rise of 9.1 percent in September, its largest
monthly gain since November 2009.
Spot palladium <XPD=> rose nearly 2 percent to $537.55 an
ounce. The price hit a near 4-month high of $563 on Sept. 15,
while platinum <XPT=> was up 0.5 percent at $1,629.00.
(Additional reporting by Lewa Pardomuan and Rujun Shen in
SINGAPORE; Editing by Anthony Barker)
