* Gold hits record above $1,295 an ounce after Fed move
* Dollar slips, unease grows over paper currency stability
* iShares silver holdings see biggest inflow in 10 months
(Updates prices, adds comment)
By Amanda Cooper and Jan Harvey
LONDON, Sept 22 (Reuters) - Gold hit record highs for a
fifth consecutive session on Wednesday 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 also hit a 2-1/2 year peak and edged closer to its
highest in 30 years as investors sought cheaper safe-haven
assets, which was reflected in the largest one-day inflow of
metal into the iShares Silver Trust in 10 months.
Spot gold <XAU=> hit a new record of $1,296.10 an ounce and
was bid at $1,293.75 an ounce at 1357 GMT, showing a 0.6 percent
gain on the day. U.S. gold futures <GCZ0> rose $21.00 an ounce
to $1,295.30, having hit a contract high at $1,298.00.
The metal is benefiting from concerns over the stability of
the financial system and the outlook for fiat currencies. While
dollar weakness, a typical driver of gold, is lifting prices,
the metal's appeal as a safe store of value has broadened.
"This is not just about the dollar any more," said Pau
Morilla-Giner, senior portfolio manager and head of alternative
investments, equities and commodities at London & Capital.
"This is about any currency that is used and generated in a
country with massive dislocations, an excess of sovereign debt
and a weak banking system. And now, for the first time in
history, all major Western currencies have that problem."
The dollar hit its lowest since late April versus the euro
on Wednesday after the Fed signalled it may introduce fresh
measures to bolster a sluggish U.S. recovery, opening the door
to pumping hundreds of billions of new dollars into the economy.
[] []
Credit Agricole analyst Robin Bhar said he interpreted the
Fed statement as "a conditional easing bias".
"It pushes the door for QE2 (a second round of quantitative
easing) wider," he said, adding that this had implications "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.
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.
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For a graphic showing the relative performance of gold versus
other commodities so far this year, click on:
http://r.reuters.com/hun72k
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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.
Among other precious metals, 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 $21.10, up 0.8 percent on the
day, and set for a rise of 9.1 percent in September, its largest
monthly gain since November 2009.
"Historically, the silver price has often acted as a geared
play on gold prices, so when the gold price is rising, often the
silver price outperforms," said Nicholas Brooks, head of
research at London's ETF Securities.
"However, when the gold price falls, silver can fall
sharply. Silver had also tended to be more sensitive to the
business cycle due to its heavy use in industry."
Spot palladium <XPD=> rose nearly 4 percent to $546 an
ounce. The price hit a near four-month high of $563 on Sept. 15,
while platinum <XPT=> was up 0.9 percent at $1,635.00.
(Editing by Alison Birrane)
