PRECIOUS-Gold ushered to record high as dollar falters

                                
 * Gold's uptrend intact, near-term target seen at $1,050/oz
                                
 * SPDR Gold holdings <XAUEXT-NYS-TT> inch up 0.2 pct
                                
 
                                
 (Recasts, updates prices and comments, previous TOKYO)
                                
 By Humeyra Pamuk
                                
 LONDON, Oct 7 (Reuters) - Gold powered to a record high on
Wednesday, topping the previous day's gains, as dollar weakness
and mounting worries about potential inflation enticed more
investors to the precious metal.
                                
 Spot gold <XAU=> hit a historic $1,048.20 an ounce and was
at $1,046.60 an ounce by 1003 GMT, versus $1,040.85 quoted late
in New York on Tuesday. U.S. December gold futures <GCZ9> hit a
new peak of $1,049.70 an ounce.
                                
 Other precious metals benefitted from bullion's rally with
palladium <XPD=> hitting $313.50 an ounce, its highest since
August 2008 while palladium rose to a two-week high <XPD=> and
silver <XAG=> climbed to a three-week high.
                                
 "The demand is coming almost exclusively from the investment
side," said Eugen Weinberg, analyst at Commerzbank. "Gold
reaching an all-time high is attracting new investment. his
momentum can take us to even $1,100 an ounce," he said.
                                
 "As long as we don't see a sustainable rally in the dollar,
I don't think it (the rise) will stop," Weinberg said.
                                
 For a graphic on rise rise vs the dollar's loss:
                                
 http://graphics.thomsonreuters.com/109/CMD_GLDPRF1009.gif
                                
 For graphic on gold's correlation with stocks, the dollar
and oil:
                                
 http://graphics.thomsonreuters.com/109/GLD_PRCCRR1009.gif
                                
 The dollar extended loses against commodity currencies,
hitting the lowest in a year or more against Canadian, New
Zealand, and Australian dollars. [FRX/]
                                
 Bullion has gained nearly 20 percent this year, helped by
dollar weakness and on the back of escalating inflation worries
after the central banks and governments across the globe poured
billions of dollars into the financial system to revive growth.
                                
 However, current prices are still sharply below the
inflation adjusted record pinpointed by analysts. Metals
consultancy GFMS put that figure as high as $2,079 an ounce.
                                
 For a graphic on inflation adjusted gold price:
                                
 http://graphics.thomsonreuters.com/109/GLD_PRCINF1009.gif
                                
 
                                
 WEAKER PHYSICAL DEMAND?
                                
 Gold's rally has boosted flows into exchange traded funds
(ETF). The world's largest gold-backed ETF, the SPDR Gold Trust
<GLD>, said its holdings stood at 1,100.514 tonnes as of Oct. 6,
up 0.2 percent or 2.441 tonnes from the previous business day
for the third consecutive day of increase.<XAUEXT-NYS-TT>
                                
 "The surge in demand for gold does not appear to be short
term in nature as we have been seeing very rapid growth of
investor holdings of gold through our ETCs for over a year now,"
said Nicholas Brooks, Head of Research and Investment Strategy
at ETF Securities.
                                
 ETF Securities' said its total gold holdings now stand at
8.3 million ounces, up 110 percent over the past two years.
                                
 However, the high prices are set to curb demand for physical
gold, traders say, potentially weakening the fundamental case
for gold's sustainable rally.
                                
 "The ETFs are attracting some inflows but those by no means
can compensate for the falling physical demand from the
jewellery side," Weinberg said. "In India, I think despite the
festive season there, demand will be very weak given current
prices," he said.
                                
 For a story on physical gold demand click on [ID:nSYD345836]
                                
 Among other precious metals, silver <XAG=> rose to $17.49 an
ounce, its highest since September 17, and was last at $17.43 an
ounce versus $17.32 an ounce last quoted in New York on Tuesday.
                                
 Platinum <XPT=> climbed to $1,338 an ounce, its highest
since September 23 and was last at $1,332 an ounce from
$1,313.50 an ounce.
                                
 For a graphic on gold's price in dollars and euros, click
on:
                                
 http://graphics.thomsonreuters.com/109/GLD_PRCEUR1009.gif
                                
 Also see TAKE A LOOK-Gold hits record high on [ID:nL6354181]
(Reporting by Humeyra Pamuk, Editing by Veronica Brown)