* Dollar recovers versus the euro amid concerns over banks
* Prospects of fresh cenbank buying, inflation support gold
* SPDR gold ETF holdings edge higher
(Releads, updates prices, adds graphic)
By Jan Harvey
LONDON, Nov 24 (Reuters) - Gold inched up on Tuesday as
investors favoured it as a hedge against medium-term dollar
weakness and possible inflation, but remained below the previous
session's record peak as the U.S. currency edged higher.
The prospect of further dollar weakness and more gold buying
by the official sector firmly underpinned prices, analysts said.
Spot gold <XAU=> was bid at $1,169.50 an ounce at 1221 GMT,
against $1,165.85 late in New York on Monday. U.S. gold futures
for December delivery <GCZ9> on the COMEX division of the New
York Mercantile Exchange rose $5.50 to $1,170.20 an ounce.
Gold prices have rallied 12 percent since the beginning of
November, when reports emerged that India's central bank had
bought 200 tonnes of gold from the IMF. Russia, Sri Lanka and
Mauritius have all since also announced gold acquisitions.
"Gold has proved over the last couple of days that
profit-taking is not lasting very long," said Peter Fertig, an
consultant at Quantitative Commodity Research.
"Investors are coming in, especially if the U.S. dollar is
under pressure against the major currencies. That is driving the
market, as is speculation that another central bank will buy
gold."
"Definitely prices could still go higher -- $1,200 is within
reach, and there is no reason why it should not be reached this
calendar year," he added.
Gold hit a high of $1,173.50 an ounce on Monday as the
dollar slid against a basket of currencies, boosting interest in
the metal as an alternative asset and making it cheaper form
holders of other currencies.
But prices have been kept in check on Tuesday by a recovery
in the U.S. currency. The euro fell against the dollar on
banking sector concerns, though it pared losses as a key measure
of German business sentiment beat forecasts. []
WHOLESALE DEMAND
Gold's slight correction from record highs led to a pick-up
in wholesale demand for the metal in major bullion consumer
India, traders said.
Any further dips are likely to be met by strong buying, they
added. "People are asking for $1,150, we have a few orders at
that level," said a dealer with a state-run bank in Mumbai.
Analysts and fund managers say that in addition to dollar
weakness, inflation prospects in 2010 and more official sector
buying are set to support prices.
For graphic showing gold's relationship to inflation
expectations, click on:
http://graphics.thomsonreuters.com/119/GLD_INFP1109.gif
"The investment case for gold has become increasingly
compelling, with central bank buying and a structural change in
interest in gold as an investment at the retail level," said
Standard Chartered in a note.
The bank said although pockets of dollar strength would
likely check gold's progress in the first half of next year, by
the fourth quarter it is set to average $1,300 an ounce.
The world's largest gold-backed exchange-traded fund, the
SPDR Gold Trust <GLD>, said its holdings stood at 1,121.457
tonnes as of Nov. 23, up 3.964 tonnes or 0.4 percent from the
previous business day. []
Among other precious metals, spot silver <XAG=> was bid at
$18.62 an ounce against $18.59, platinum <XPT=> was at $1,453.50
an ounce against $1,454.50, and palladium <XPD=> was at $372 an
ounce against $369.
ETF Securities, which operates exchange-traded products that
issue securities backed by physical commodities, said its
palladium ETP <PHPD.L> holdings rose more than 13,600 ounces to
a record high of 611,924 ounces on Monday.
Holdings of its platinum-backed product <PHPT.L> edged up to
423,439 ounces from 422,762 ounces, also a record high.
(Reporting by Jan Harvey; Editing by William Hardy)
((jan.harvey@thomsonreuters.com; +44 207 542 7744; Reuters
Messaging: jan.harvey.reuters.com@reuters.net))
