* Dollar weakness persists, boosting fund interest in gold
* SPDR gold ETF reports fourth successive daily inflow
* Silver, palladium hit multi-month peaks
(Updates throughout, changes dateline from TOKYO)
By Jan Harvey
LONDON, Oct 8 (Reuters) - Gold prices rallied to record
highs for a third successive session in Europe on Thursday, as
persistent weakness in the dollar fuelled fund buying of the
metal as an alternative to the U.S. unit.
Gold's gains lifted other precious metals, with silver
reaching its strongest level since July 2008 and palladium
hitting a 13-month peak.
Spot gold <XAU=> rose to $1,054.30 an ounce at 0926 GMT
against $1,043.70 late in New York on Wednesday. Earlier it
touched a record high of $1,058.20 an ounce.
"The dollar just continues to weaken and that's the main
driver of gold," said Citigroup analyst David Thurtell.
"I'd be surprised if we didn't see a fair bit of scrap
coming out of the woodwork, and the indications are that Indian
demand will be very poor at these high prices. But it seems
there are enough investors who are happy to buy it to more than
offset that."
He said the precious metal could rally as high as $1,200 an
ounce before the market saw a significant correction.
The dollar index <.DXY> weakened on Thursday after strong
jobs data sent the Australian dollar higher, with an upbeat U.S.
corporate earnings report fuelling investor demand for higher
risk and yield currencies. []
The euro <EUR=> rose to $1.4767. Currency traders are
awaiting the outcome of European Central Bank and Bank of
England policy meetings concluding on Thursday.
Other hard commodity prices rose, with crude oil climbing
back above $70 a barrel. Gold is often seen as a hedge against
oil-led inflation. []
U.S. gold futures for December delivery <GCZ9> on the COMEX
division of the New York Mercantile Exchange rose $11.60 to
$1,056.00 an ounce.
GOLD ETF SEES INFLOWS
Demand for gold-backed exchange-traded funds edged higher
after waning over the summer months, with the largest, New
York's SPDR Gold Trust <GLD>, reporting a fourth straight day of
inflows on Tuesday. []
Investors in the fund bought nearly 14 tonnes of gold,
lifting its holdings 1.3 percent, in the week to Tuesday. Buying
by funds and larger investors is driving the current rally,
traders said.
"It is pretty much all a fund and investor driven rally,"
said senior Commerzbank trader Michael Kempinski "Those guys
like to buy at the highs and have the power to push it through."
Indian jewellery buying trickled in ahead of the key
festival of Diwali on Oct. 19, though the recent price rally is
deterring some buyers. Jewellery demand in the country, the
largest consumer of gold last year, has been weak in 2009.
Among other precious metals, silver rallied to a 14-month
high, lifted by gains in gold and also benefiting, as an
industrial metal, from rising optimism over the outlook for the
global economy.
Spot silver <XAG=> was at $17.76 an ounce against $17.55,
having earlier touched a high of $17.89 an ounce.
"Silver will continue to look to gold for direction in the
coming sessions, but having cleared last month's high... (it)
will now look to target chart highs from last April/May between
$17.92-18.34," said TheBullionDesk.com analyst James Moore.
Platinum and palladium, primarily used in autocatalyst
production, also rose in gold's wake. Platinum <XPT=> was at
$1,333 an ounce against $1,043.70, while palladium <XPD=> was at
$314 against $311. Earlier it hit a 13-month high of $315.50.
(Reporting by Jan Harvey; Editing by Sue Thomas)
