* Economic hopes buoy demand for bullion
* SPDR gold ETF holdings <XAUEXT-NYS-TT> stay at record high
By Risa Maeda
TOKYO, June 3 (Reuters) - Gold rose to test $985 per ounce
again on Wednesday, as a weakening U.S. dollar prompted investors
to buy bullion as a hedge against the deterioration of
dollar-denominated portfolios.
Hopes that the global economy may be on the road to recovery
also buoyed demand for bullion. Gold is used in electric
equipment and other products, and inflation can boost demand for
the precious metal.
"The U.S. dollar is weak, with the British pound and the euro
getting stronger, so investor buying continued," said Dick Poon,
manager of precious metals at Heraeus in Hong Kong.
"Right now customers are still bullish on the market, with
many looking to gold prices jumping over an all-time high of
$1,030 (by the end of this year)," he said.
But there is general caution that gold has risen too fast,
keeping the market's topside capped for now, traders said.
Spot gold <XAU=> climbed 0.4 percent to $984.45 per ounce at
0311 GMT from New York's notional close of $980.85 on Tuesday,
when it rose as high as $986.40.
It touched a three-month high of $988.50 on Monday, up almost
10 percent from the level a month earlier.
U.S. gold futures for August delivery <GCQ9> edged up 0.2
percent to $986.10 per ounce from Tuesday's $984.40 settlement on
the COMEX division of the New York Mercantile Exchange.
In the currency markets, the euro <EUR=> stayed near a
5-month high of $1.4332 marked on Tuesday ahead of the European
Central Bank's monetary policy decision later in the week.
The British pound traded at $1.6580 after hitting a
seven-month high of $1.6595 <GBP=D4> on Tuesday.
Bullion was also supported by the U.S. government's extra
borrowing making the U.S. Treasury market vulnerable to falls,
traders said, with the benchmark 10-year note yield reaching a
six-month peak of 3.75 percent last week. []
A drop in the appeal of U.S. Treasuries often prompts funds
to buy gold, another safe-haven asset.
"Gold will keep shining for a while, taking advantage of
jitters in the U.S. bond market as well as the weakness in the
U.S. dollar," said Yuki Sonoda, an advisor to Daiichi Commodities
Co in Tokyo.
"The time for it to test the $1,000 level is well in sight,"
he said, referring to a level last reached in late February.
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings stayed unchanged on June
2 from a record 1,134.03 tonnes marked the previous day.
[]
Precious metals prices at 0310
Metal Last Change Pct chg YTD pct chg Turnover
Spot Gold 984.60 3.75 +0.38 18.24
Spot Silver 16.10 0.16 +1.00 9.00
Spot Platinum 1235.00 -3.50 -0.28 -18.75
Spot Palladium 247.00 0.50 +0.20 -32.88
TOCOM Gold 3040.00 12.00 +0.40 -0.65 26227
TOCOM Platinum 3836.00 51.00 +1.35 -28.15 13120
TOCOM Silver 493.00 13.60 +2.84 -8.87 384
TOCOM Palladium 776.00 29.00 +3.88 -42.56 792
Euro/Dollar 1.4285
Dollar/Yen 95.65
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Joseph Radford)
