* Dollar wilts on expectations U.S. rates will remain low
* Oil, industrial metals lifted by softer dollar
* Chinese passenger car sales surge in October
(Updates prices, adds comment)
By Jan Harvey
LONDON, Nov 9 (Reuters) - Gold hit a record high above
$1,110 an ounce in Europe on Monday as the dollar index <.DXY>
slid 1 percent on expectations U.S. interest rates will remain
low, boosting interest in the metal as an alternative asset.
Spot gold <XAU=> reached a peak of $1,110.85 an ounce, and
was bid at $1,109.50 an ounce at 1320 GMT, against $1,096.30
late in New York on Friday.
The precious metal is extending last week's near 5 percent
gains, when fund buying took it to record highs after India's
central bank bought 200 tonnes of gold from the International
Monetary Fund and the dollar weakened further.
Deutsche Bank trader Michael Blumenroth said some inflation
fears are starting to be felt, while the weak dollar remains the
key driver of the market. "People are expecting more weakness
there," he said.
"In general, the rally looks healthy," he added. "Gold feels
comfortable with four digits now."
For chart showing correlation of gold prices and inflation
expectations, click on:
http://graphics.thomsonreuters.com/119/GLD_TPSS1109.gif
U.S. gold futures for December delivery <GCZ9> on the COMEX
division of the New York Mercantile Exchange rose $14.30 to
$1,110.00 an ounce.
The dollar weakened broadly on Monday after a G20 meeting
and U.S. jobs data did little to alter the view that U.S.
interest rates will stay low for the foreseeable future,
offering little incentive to buy the currency. []
Weakness in the U.S. unit tends to benefit all dollar-priced
assets, as it makes them cheaper for holders of other
currencies.
Other commodities also rose, with industrial metals climbing
across the board and oil prices gaining more than $1 a barrel.
Strength in crude prices often helps support gold, which can be
used as a hedge against oil-led inflation. [] []
The Russian central bank's first deputy chairman, Alexei
Ulyukayev, said on Monday the central bank may buy gold from the
state repository, Gokhran. []
"Gold is supported by significant investment demand and
central banks buying that are trying to diversify their reserves
away from the falling dollar," Fairfax analyst Marc Elliott said
in a note.
MORE GAINS EXPECTED
Demand for physical gold was soft, however, with high prices
curbing appetite for bullion in major consumer India, although a
strong rupee lent support. []
Dealers noted sales from Indonesia but the limited amount of
scrap being returned to the physical market, despite record
prices, suggested that holders expected more gains. []
European traders noted that gold's strength in currencies
other than the dollar suggested gains could be resilient.
Gold priced in euros <XAUEUR=R> held near its highest since
March at 740.69 euros on Monday, while sterling-denominated gold
<XAUGBP=R> hit 661.88 pounds, within reach of eight-month highs.
The world's largest bullion-backed exchange-traded fund, New
York's SPDR Gold Trust, said its holdings were unchanged on
Friday from the previous session. []
ETF Securities said holdings of its ETFS Physical Gold
<PHAU.L> fund rose more than 2 percent to 3.324 million ounces
on Friday.
Among other precious metals, silver <XAG=> was bid at $17.68
an ounce versus $17.38, platinum <XPT=> at $1,353 an ounce
versus $1,342.50, and palladium <XPD=> at $331 against $327.50.
Both platinum and palladium held near the multi-month highs
they hit in late October, as traders bet strength in gold prices
and an expected recovery in demand from carmakers, the major
consumers of the platinum group metals, will buoy prices.
Data released on Monday showed China's passenger cars sales
surged 75.8 percent in October from a year earlier, extending
the explosive growth of recent months as government incentive
policies continued to lure customers. []
(Reporting by Jan Harvey; Editing by Anthony Barker)
