* Gold rises after Fed says will buy $300 bln of debt
* Traders expect move may prompt dlr weakness, inflation
* SPDR gold ETF hits fresh record
(Recasts, updates with quotes, closing prices, adds NEW
YORK to dateline)
By Frank Tang and Paul Lauener
NEW YORK/LONDON, March 19 (Reuters) - Gold rose to its
highest level in nearly three weeks on Thursday as the dollar
tumbled and inflation concerns flared after the U.S. Federal
Reserve unveiled plans to spend $300 billion on long-dated
Treasuries.
Bill O'Neill, managing partner of LOGIC Advisors said that
the Fed's move highlighted gold's value as an inflation hedge.
"It also points out that, if the Fed took such dramatic
moves, there are still some serious problems out there, and it
certainly renewed the flight to safety buying," O'Neill said.
Spot gold <XAU=> rose to a peak of $961.50 an ounce, its
highest since Feb. 27. It was at $958.90 an ounce at 3:43 p.m.
EDT (1943 GMT), up 1.4 percent from its last quote $940 in New
York late Wednesday.
U.S. gold futures for April delivery <GCJ9> settled up
$69.70, or 7.8 percent, at $958.80 an ounce on the COMEX
division of the New York Mercantile Exchange.
Calyon metals analyst Robin Bhar said while the weaker
dollar was benefiting all commodities, it was the longer-term
implications of the Fed's move for inflation that was largely
driving gold higher.
"This will boost the amount of dollars in the system, it
will boost money supply, and it will boost inflationary
expectations down the road," he said.
Gold has long been seen as a key inflation hedge.
The dollar extended a sell-off after a 3 percent slide on
Wednesday -- its biggest one-day drop since at least 1985 --
after the U.S central bank announced plans to flood the market
with dollars. []
Gold traditionally moves in the opposite direction to the
dollar as it is often used as a currency hedge, while a weaker
dollar makes gold cheaper and more attractive for holders of
other currencies.
Central banks in Britain and Japan have already announced
they would purchase their respective government debt, while the
Swiss National Bank last week said outright it would sell
francs to weaken its currency.
RECORD
A rise in gold-backed exchange-traded funds and investment
in gold production also suggested support for gold.
Holdings of the world's largest gold-backed ETF, the SPDR
Gold Trust <GLD>, rose to a record 1,084.33 tonnes by March 18,
up 15.28 tonnes or 1.4 percent from the previous day.
Other precious metals tracked gold higher, also benefiting
from the weaker dollar. Spot silver <XAG=> surged to $13.68 an
ounce, its highest since Feb. 26. It was last at $13.55 an
ounce, up 5.2 percent from its Wednesday finish of $12.88.
Holdings of the world's biggest silver-backed ETF, the
iShares Silver Trust, rose 1.3 percent or 101.18 tonnes on
Wednesday. []
Platinum <XPT=> meanwhile climbed to a five-month peak of
$1,120.50, and was at $1,113.50 an ounce, up 5.4 percent from
its previous close of $1,057.
The metal, which is chiefly used as a component in
autocatalysts, was boosted by the weak dollar. In industry
news, the U.S. Treasury has unveiled a $5 billion bailout for
the car industry. []
Palladium <XPD=> rose to $202.50 an ounce from its previous
finish of $197. Earlier it touched a high of $206.50, matching
its high of Feb. 24.
(Additional reporting by Jan Harvey and Pratima Desai; Editing
by Marguerita Choy)
