* 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
(Recasts, adds comment, updates market activity, new
byline/dateline, previously LONDON)
By Frank Tang
NEW YORK, Sept 22 (Reuters) - Gold jumped on Wednesday for
a fifth straight day, hitting record highs near $1,300 an ounce
as the dollar tumbled the day after the Federal Reserve raised
expectations that more monetary easing was on the way.
Silver also hit a 2-1/2 year peak at above $21 an ounce,
near its highest in 30 years as investors poured into exchange
traded funds in search of cheaper safe-haven assets.
The dollar fell broadly against major currencies after
Tuesday's Fed statement signaled its readiness to pump billions
of dollars into the economy through purchases of government
debt, a process known as quantitative easing.
The dollar slumped and bullion surged as investors sought a
hedge against economic uncertainty.
"Possible quantitative easing continues to put a
significant weakening into the dollar," said Frank McGhee, head
precious metals trader at Chicago-based Integrated Brokerage
Services. "You're seeing the euro and gold rally together for
the first time in a long time. So, the inverse relationship
between gold and dollar may be finally reasserting iteself."
McGhee said gold rallied on concern that the dollar could
head into an extended period of weakness, which often boosts
gold.
That inverse gold/dollar correlation has been shaky this
year, but Reuters data showed it has strengthened to a negative
0.8 in the last five days from 0.3 for the past 25 days.
Spot gold <XAU=> hit a new record of $1,296.10 an ounce and
was trading at $1,289.85 an ounce at 12:45 p.m. EDT (1645 GMT),
showing a 0.3 percent gain on the day. U.S. gold futures <GCZ0>
rose $17.20 an ounce to $1,291.50.
In addition to dollar weakness, gold has gotten a boost
from concerns about the stability of the financial system and
the outlook for fiat currencies in general.
"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."
CONDITIONAL MONETARY EASING
The dollar hit its lowest since late April versus the euro
and fell to its weakest level versus yen since Japan's
intervention. []
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."
On charts, technical support was evident after spot gold
cleared a trendline connecting the highs from December and
June, and resistance from a rising channel dated back to late
July coincided with the $1,300 mark. (Graphic:
http://link.reuters.com/nac94p )
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. (Graphic: http://r.reuters.com/hun72k )
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=> hit a high of $21.16. It rose to $21, up
0.3 percent on the day, and set for a rise of 9 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 3 percent to $544 an ounce,
while platinum <XPT=> inched up 0.6 percent at $1,630.00.
Prices at 12:59 p.m. EDT (1659 GMT)
LAST NET PCT YTD
CHG CHG CHG
US gold <GCZ0> 1290.20 15.90 1.3% 17.7%
US silver <SIZ0> 21.015 0.375 1.8% 24.8%
US platinum <PLV0> 1632.40 20.00 1.2% 11.0%
US palladium <PAZ0> 544.00 13.95 2.6% 33.1%
Gold <XAU=> 1288.75 2.85 0.2% 17.5%
Silver <XAG=> 20.98 0.05 0.2% 24.6%
Platinum <XPT=> 1630.00 9.50 0.6% 11.2%
Palladium <XPD=> 542.50 16.00 3.0% 33.8%
Gold Fix <XAUFIX=> 1293.50 1.75 0.1% 17.2%
Silver Fix <XAGFIX=> 21.08 32.00 1.5% 24.1%
Platinum Fix <XPTFIX=> 1632.00 4.00 0.2% 11.3%
Palladium Fix <XPDFIX=> 543.00 6.00 1.1% 35.1%
(Additional reporting by Amanda Cooper and Jan Harvey in
London; Editing by David Gregorio)
