* Persistent dollar weakness underpins market
* SPDR Gold holdings inch up near record high
* China central bank official warns of bubble
* http://graphics.thomsonreuters.com/129/MKT_GLDCR1209.gif
By Miho Yoshikawa
TOKYO, Dec 3 (Reuters) - Gold hit a record high over $1,225
an ounce on Thursday, exerting an irresistible pull on
investors seeking an alternative to the dollar, despite a
Chinese central bank official warning against a potential asset
price bubble.
Gold has risen by more than 7 percent since touching a low
of $1,136.80 last Friday on now-waning fears that the Middle
Eastern emirate Dubai might default on its debt, which spurred
investors to sell the metal to raise cash to cover losses.
Spot gold <XAU=> rose as high as $1,226.10 per ounce before
slipping to $1,1218.90 by 0826 GMT, still up $3 from New York's
notional close.
U.S. gold futures for February delivery <GCG0> touched an
all-time high of $1,227.50.
Expectations for some central banks, especially China's,
to
diversify reserves into gold are also a key driving factor,
particularly after India last month bought about half the 403.3
tonnes of gold the International Monetary Fund planned to sell.
But gold prices are high and markets should be careful of a
potential asset bubble forming, Hu Xiaolian, a vice-governor of
the People's Bank of China, said on Wednesday.
"We must watch out for bubbles forming on certain assets,
and be careful in those areas," Hu said in Taipei.
[]
Another Chinese official also emphasised the long view.
Zhang Bingnan, a senior official of the China Gold
Association, said there was more scope for China to step up
gold purchases, but only over the long term, and not in the
open market, adding that he was voicing a strictly personal
view. []
China's more than $2 trillion in foreign exchange reserves
are mostly parked in U.S. treasuries, despite calls from some
in China to invest the reserves in oil and other natural
resources that the fast-growing Chinese economy will need in
future. []
Analysts say the dollar's persistent weakness has come to
the fore, pushing lingering worries about Dubai's loan payment
problems to the backburner.
"The persistent view that the dollar will remain weak stems
from moves to review dollar-based assets and the belief that
interest rates will be stuck at low levels, and these are
factors that remain unchanged," Shuji Sugata, a manager at
Mitsubishi Corp Futures, said.
The market forces that have driven gold above $1,200 an
ounce are still largely in place, but the current rally must
lose momentum at some point, Richard O'Brien, chief executive
of Newmont Mining <NEM.N>, said on Wednesday. []
"We're going to run out of gas at some point, but I don't
think that means we're going to suffer lower gold prices for
very long," O'Brien told Reuters in an interview.
Fundamentals boosting gold include a steady decline in
global production, which he expected to continue in the years
ahead.
For a graphic on gold production versus demand, click:
http://graphics.thomsonreuters.com/129/GLD_SPLYDMD1209.gif
Gold, which has risen 25 percent in the last three months,
reached record highs in euro and sterling terms on Thursday,
Reuters data show, indicating independent gold strength.
For a graphic on gold priced in different currencies,
click:
http://link.reuters.com/kyf74g
Gold denominated in yen, Swiss francs, euros, pounds and
Australian dollars is seeing returns of between 15 and 22
percent over the last three months.
"Gold is being viewed as one of the primary alternatives to
holding paper currency and the gold price has become a key
barometer of investor confidence in government policies," said
Nigel Phelan, director of ETF Securities in Australia and New
Zealand.
Precious metals prices at 0826 GMT
Metal Last Change Pct chg Day ago pct MA 30
Spot gold $1218.90 $3.00 +0.25% +35.89% $860.10
Spot silver $19.20 $0.00 +0.00% +60.27% $11.29
Spot plat $1494.50 -$6.00 -0.40% +1.01% $1410.37
COMEX gold $1219.80 $7.30 +0.60% +1.68%
$1121.30 TOCOM gold 3,451 41 +1.20% +3.76%
3,227 TOCOM plat 4,225 50 +1.20%
+3.10% 4,021 Currencies
Euro/dlr $1.511 $0.014 +0.94%
+1.23%
Dlr/yen 87.70 -1.41 -1.58% -2.12%
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(With additional reporting by James Regan in Sydney; Editing
by Clarence Fernandez)
((miho.yoshikawa@thomsonreuters.com; +81-3 6441 1854; Reuters
Messaging: miho.yoshikawa.reuters.com@reuters.net))
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