* End-of-quarter buying lends support at higher levels
* Stronger crude price bolsters inflation-hedge appeal
* Recovery plays into base metals could cap upside
By Nick Vinocur
London, June 26 (Reuters) - Gold hit a two-week high above
$946.00 per ounce on Friday, extending its gains as the dollar
retreated, while firmer oil prices raised its appeal as a
potential inflation hedge.
Spot gold <XAU=> touched a high of $946.90 in London -- last
seen in mid-June -- up from $938.55 quoted late on Thursday in
New York. The metal stood at $946.65 by 1134 GMT.
Global stocks rallied while the dollar fell against a basket
of currencies <.DXY>, bolstered by a return to risk-seeking
behaviour after remarks by the U.S. Federal Reserve convinced
investors that borrowing costs would stay near zero and the
debt-buyback programme would continue apace. []
The weaker U.S. unit also made dollar-denominated gold
cheaper for holders of foreign currencies.
The precious metal, viewed as a potential hedge against
inflation, also got a boost from steady oil prices as supply
concerns held crude <CLc1> above $70 a barrel. []
Analysts said that gold was rallying on the weaker dollar
and end-of-quarter deals, despite weak fundamental demand.
"From a fundamental perspective at least, $945 is a very
good position for gold to be entering the second half of the
year," said Nick Moore, head of commodity strategy at RBS Global
Banking and Markets.
RECOVERY PLAYS
Higher base metal prices, which have soared since the start
of the year, could encourage investors to switch out of their
holdings in gold to take advantage of higher demand for raw
materials ahead of any economic recovery, analysts said.
"I'm concerned there will be more appetite for other things,
and gold could get neglected if people want equities, energy and
industrial metals," said Robin Bhar, an analyst at Calyon.
"Next week is a new quarter, which could be associated with
fresh investment flows into plays on the recovery," he added.
Copper <MCU3> prices are up about 60 percent on the year,
while aluminium <MAL3> used in transport and packaging is on
track for its biggest monthly gain since May 1988. []
Inflows into gold-backed exchange-traded funds waned,
reflecting weak fundamental demand for gold from retail
investors and the jewellery market.
Holdings at the world's largest gold-backed exchange-traded
fund, SPDR Gold Trust <GLD>, fell 0.5 percent to 1,125.74 tonnes
as of June 25, down 5.5 tonnes from the previous business day.
[]
U.S. gold futures for August delivery <GCQ9> strengthened to
$946.8 an ounce, rising 0.8 percent on the day.
In other precious metals, spot silver <XAG=> firmed to
$14.25, against $14.01 quoted late in New York on Wednesday,
while platinum <XPT=> climbed to $1,199.00, against $1,186.00
and palladium <XPD=> strengthened to $243.50 from $242.00.
(Additional reporting by Chikako Mogi in Tokyo; editing by
Anthony Barker)
