* Gold hits record as traders expect dollar weakness
* SPDR Gold holdings up for second day
* Gold hits highs in euro, sterling terms
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By Jan Harvey
LONDON, Dec 2 (Reuters) - Gold hit record highs at $1,216.75
an ounce in Europe on Wednesday as investors bet on higher
prices, with funds lengthening positions due to expectations of
a fresh leg of dollar weakness and more central bank buying.
The metal also reached all-time highs in euro and sterling
terms and a historic peak when priced in the Japanese yen,
according to Reuters data, indicating independent gold strength.
Spot gold <XAU=> was bid at $1,211.05 an ounce at 1100 GMT,
against $1,196.00 late in New York on Tuesday.
U.S. gold futures also hit a record at $1,218.40 an ounce.
Gold for February delivery <GCG0> on the COMEX division of the
New York Mercantile Exchange was later up $11.80 at $1,212.00.
The dollar edged up slightly against the euro <EUR=> on
Wednesday, but analysts said with U.S. interest rates likely to
remain depressed and risk appetite improving, the U.S. currency
was set for further losses. []
"Investors are sailing out of the safe havens into more
risky assets, and this is weakening the U.S. dollar," said Peter
Fertig, a consultant at Quantitative Commodity Research.
"The fact that stock markets are performing better and we
have weakness in the U.S. dollar are supportive for precious
metals, and from that perspective I believe this rally remains
sustainable."
Investment interest in gold remained firm, with the world's
largest gold-backed exchange-traded fund, the SPDR Gold Trust
<GLD>, saying its holdings rose 0.61 tonnes or 0.05 percent to
1,130.604 tonnes on Tuesday. []
The holdings are approaching a record marked in June of
1,134.03 tonnes.
Gold also hit record highs in sterling <XAUGBP=R> terms and
when priced in the euro <XAUEUR=R>. For a graphic of gold's
performance in other currencies, click on:
http://graphics.thomsonreuters.com/129/GLD_CURR1209.gif.
STRIKE
Traders said options-related activity was also lifting gold
towards fresh highs.
"At these levels the option strikes are the main focus,"
said Simon Weeks, head of precious metals at the Bank of Nova
Scotia. "Yesterday there was a struggle around $1,200, and now
that we are above there, there will be an increasing pull
towards $1,250."
In the physical market, the flow of scrap gold re-entering
the Indian market -- which usually increases when prices rise --
tailed off as sellers sought higher prices, dealers said.
Gold demand in India cooled on Wednesday as prices jumped to
record highs. But while India was the world's largest bullion
market last year, a dip in buying there is being easily offset
by rising speculative interest. []
Speculators bet on further buying by central banks,
particularly in Asia, after many years of net official sector
sales. India's purchase of 200 tonnes of gold, announced in
November, sparked a 13 percent prices rally that month.
The move strengthened speculation that other emerging
country central banks will follow suit, particularly China,
which has the world's largest foreign exchange reserves worth
$2.27 trillion, mostly held in U.S. Treasury bonds. []
Strength in gold has lifted other precious metals. Silver
<XAG=> and palladium <XPD=> rallied to their strongest levels
since July 2008. Spot silver was later bid at $19.16 an ounce
against $19.07, and palladium at $384.50 against $387.50.
Spot platinum <XPT=> rose as high as $1,493.50 an ounce, its
highest since August last year. It was later at $1,480.50 an
ounce against $1,478.50.
For graphic of gold's inflation-adjusted high, click on:
http://graphics.thomsonreuters.com/129/GLD_PRCINF1209.gif
(Editing by William Hardy)
((jan.harvey@thomsonreuters.com; +44 207 542 7744; Reuters
Messaging: jan.harvey.reuters.com@reuters.net))
