* Dollar turns higher vs the euro after Fed comments
* Gold fluctuates, struggles to sustain gains
* Largest gold ETF records inflow, Indian buying picks up
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, Oct 15 (Reuters) - Gold slid below $1,370 an ounce
in volatile trade on Friday, having earlier jumped to within a
few dollars of the previous day's record high, as currency
markets see-sawed after a speech by Federal Reserve Chairman Ben
Bernanke.
The U.S. unit dipped versus the euro and fell to parity with
the Australian dollar after Bernanke said there was a case for
further monetary policy action, given low U.S. inflation and
high unemployment. []
It quickly pared those losses, however, to turn higher
against the single currency.
Spot gold <XAU=> was bid at $1,371.40 an ounce at 1325 GMT
against $1,376.75 late in New York on Thursday, having earlier
slipped as low as $1,365.50. U.S. gold futures for December
delivery <GCZ0> fell $5.20 to $1,372.40.
"(We are) building up to a profit-taking Friday -- probably
healthy, given the recent run-up," said Saxo Bank senior manager
Ole Hansen.
"The question is for how much longer the market is prepared
to run just on the quantitative easing story. I think the market
at these levels wants to see the facts before committing
addtional capital to the upside."
Gold has climbed more than 25 percent so far this year as
the prospect of further quantitative easing in the United States
undermined the dollar and prompted investors to buy the precious
metal as a safe store of value.
Even given their current correction, gold prices remain on
track for a fifth week of gains, and have rallied to a series of
record highs in recent weeks, peaking at $1,387.10 an ounce on
Thursday, as the dollar continued its decline.
But the U.S. unit bounced back on Friday, with the euro
erasing early gains made versus the dollar as analysts said much
of the impact from additional Fed easing has been priced in.
QUANTITATIVE EASING
Quantitative easing is seen undermining the dollar in the
longer term and may also indicate that the U.S. authorities are
likely to keep interest rates near historic lows, analysts said.
Gold benefits from low interest rates, which cut the
opportunity cost of holding non-interest bearing assets. Goldman
Sachs, which recently lifted its 12-month price view on gold to
$1,650 an ounce, said the metal is still a good buy in the
current environment.
"We expect gold prices to continue to rise from current
levels as real interest rates should remain low on a
continuation of accommodative U.S. monetary policy," the bank
said in a note.
In the options markets, investors are betting heavily on the
gold price continuing to rise. The bulk of open interest for
December gold options centres on call options at $1,400 an
ounce, which give holders the right, though not the obligation,
to buy gold at that price. []
Open interest amounts to well over 17,000 contracts,
equivalent to 1.7 million ounces of gold, compared with the bulk
of open interest on December puts of 250 contracts at a strike
price of $1,360 an ounce.
Investment in gold exchange-traded funds picked up, with
holdings of the world's largest, New York's SPDR Gold Trust
<GLD>, edging higher on Thursday after falling by almost 20
tonnes in early October. []
In India, the world's biggest gold consumer, wholesale gold
buying rose on Friday afternoon after the rupee strengthened to
its highest level in 25 months, making the dollar-quoted yellow
metal cheaper for local buyers, dealers said. []
Among other precious metals, silver <XAG=> was at $24.47 an
ounce against $24.61, platinum <XPT=> at $1,687.50 an ounce
versus $1,704.15 and palladium <XPD=> at $592 versus $597.45.
(Editing by James Jukwey)
