* Dollar hits lowest since Dec as risk appetite sharpens
* Background support from inflation worries, stimulus
* SPDR gold, iShares silver ETFs both report inflows
(Recasts, updates prices, market activity to close; new
byline, changes dateline, previously LONDON)
By Frank Tang
NEW YORK, June 2 (Reuters) - Gold rose on Tuesday, inching
closer to $1,000 an ounce, as a weakening U.S. dollar prompted
more investors to pile into bullion as a hedge against
deterioration of dollar-denominated portfolios.
Inflation worries as a result of stimulus programs by
governments and central banks around the world provided
background support to gold, widely used as insurance against
declining purchasing power.
"Earlier today we had a bit of a setback from yesterday's
high and that brought some new buyers in, obviously helped by
the weaker dollar," said Saxo Bank senior manager Ole Hansen.
"All this talk about systemic risk in the dollar and where
you can hedge yourself against, that means commodities will be
favored," he said.
U.S. August futures <GCQ9> settled up $4.40 at $984.40 an
ounce on the COMEX division of the New York Mercantile
Exchange.
Spot gold <XAU=> was at $980.65 an ounce at 2:42 a.m. EDT
(1842 GMT), against its late Monday quote $973.95 in New York.
The dollar fell further against the euro after U.S. pending
home sales beat expectations to rise by 6.7 percent, boosting
appetite for riskier assets. []
The dollar also fell to its lowest since mid-December
against a basket of currencies on hopes the global economy may
be on the road to recovery. U.S. stocks added to gains. []
Gold and the dollar usually move in opposite directions,
but that inverse inverse relationship broke down early this
year as both assets benefited from a flight to safety.
Market watchers fear government efforts to pump liquidity
into the financial system could cause a sharp rise in inflation
once an economic recovery takes hold.
"Gold, when it does grab the attention of people, is a
convenient way to protect against the upcoming inflation," said
Axel Merk, portfolio manager of the Merk Hard and Asian
Currency Funds.
ETFs RISE
Holdings of the world's largest gold and silver exchange
traded funds, New York's SPDR Gold Trust <GLD> and iShares
Silver Trust <SLV>, both rose on Monday. SPDR's holdings were
up 15.27 tonnes at a record 1,134.03 tonnes. []
Buying of gold ETFs, which issue securities backed by
physical bullion, as a hedge against future risks such as
inflation, has been a major source of demand in recent months.
Among other precious metals, silver <XAG=> was at $15.94 an
ounce, up 2.3 percent from its previous finish of $15.59.
Holdings of the iShares Silver Trust <SLV> rose 260.36 tonnes
on Monday.
Platinum group metals rose despite the anticipated dismal
U.S. auto sales in May, with GM down 30 percent, Ford 24
percent lower, and Chrysler down 47 percent for the month.
Platinum <XPT=> was at $1,238.00 an ounce, up 2.4 percent
from its late Monday quote of $1,208.50, while palladium <XPD=>
was at $246 against its previous finish of $238.
(Additional reporting by Jan Harvey)
