PRECIOUS-Gold hits record high, eyes $1,050 per ounce

                                
 * 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)
                                
 By Humeyra Pamuk
                                
 LONDON, Oct 7 (Reuters) - Gold on Wednesday set record highs
for a second straight session as dollar weakness and mounting
worries about potential inflation enticed more investors toward
the precious metal.
                                
 Spot gold <XAU=> hit a historic $1,048.20 an ounce, before
easing to $1,042 an ounce by 1326 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.
                                
 Gains were later trimmed as the dollar halted its slide
versus a basket of currencies, while strong chart-based
resistance at $1,050 per ounce also weighed.
                                
 Other precious metals benefited from bullion's rally with
palladium <XPD=> hitting $313.50 an ounce, its highest since
August 2008 while platinum rose to a two-week high <XPT=> and
silver <XAG=> climbed to a three-week high.
                                
 "I think we will continue to see record highs," said
Commerzbank trader Michael Kempinski. "The dollar's bouncing
back that's why we see some profit-taking but the investors --
hedge funds and ETFs -- are absorbing all the selling quite
well."
                                
 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 moved to positive territory against a basket of
currencies, while the euro <EUR=> was little changed on the day
but stayed in sight of near two-week highs touched on Tuesday.
[FRX/]
                                
 "We could see some price weakness ahead in the short term,"
said analyst Manquoba Madinane at Standard bank in Johannesburg.
"There's a strong resistance at $1,050 an ounce," he said. "If
the dollar gains, that would put pressure on gold."
                                
 Bullion has gained nearly 20 percent this year, helped by
dollar weakness and on the back of escalating inflation worries
after 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 puts 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 $17.34 an
ounce, its highest since September 17, and was last at $17.36 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 $1,323.50 an ounce from
$1,313.50 an ounce.
                                
 Palladium <XPD=> was at $312.00 an ounce versus $305.50.
                                
 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 Keiron Henderson)