* Dollar recovers vs currency basket after briefly softening
* Prospects of fresh cenbank buying, inflation support gold
* SPDR gold ETF holdings rise to highest since late June
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By Jan Harvey
LONDON, Nov 24 (Reuters) - Gold prices retreated below
$1,165 an ounce on Tuesday as the dollar recovered after a
short-lived move lower in the wake of U.S. GDP data, curbing
interest in the precious metal as an alternative asset.
Prices remain firmly underpinned, however, by the prospect
of rising inflation next year and more gold acquisitions by the
official sector.
Spot gold <XAU=> was bid at $1,163.80 an ounce at 1503 GMT,
having risen as high as $1,171.10 in earlier trade, against
$1,165.85 late in New York on Monday. In that session it hit a
record high of $1,173.50 an ounce.
Gold prices have risen 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.
"If central banks buying gold are diversifying their
reserves back from the U.S. dollar to gold or other assets, that
is a sign that (investors) should stay long gold and short the
dollar," said Deutsche Bank trader Michael Blumenroth.
"As long as the market is thinking there is inflation to be
expected next year...central banks are buyers rather than
sellers, and there is fresh investment money flowing into the
market, there is no way you want to sell gold," he added.
The dollar initially fell against a currency basket on
Tuesday after preliminary data showed the U.S. economy grew at a
slower pace in the third quarter than previously thought, but
later recovered to trade up 0.11 percent. [] []
Its recovery has pressured gold from its earlier highs. A
near 2 percent drop in oil prices to nearly $76 a barrel ahead
of U.S. stocks data later in the session also weighed. []
However, analysts are confident fresh investment interest in
gold will lift it once more.
"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," said Peter Fertig, a consultant at Quantitative
Commodity Research.
WHOLESALE DEMAND
Gold's correction from record highs in earlier trade 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.
"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,"
Standard Chartered said 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.
For graphic showing gold's relationship to inflation
expectations, click on:
http://graphics.thomsonreuters.com/119/GLD_INFP1109.gif
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 from the previous business
day and their highest since late June. []
Silver <XAG=> was at $18.43 an ounce versus $18.59, platinum
<XPT=> at $1,450.40 an ounce against $1,454.50, and palladium
<XPD=> at $370 an ounce against $369.
ETF Securities 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.
(Editing by William Hardy)
((jan.harvey@thomsonreuters.com; +44 207 542 7744; Reuters
Messaging: jan.harvey.reuters.com@reuters.net))
