* Gold hits record in dollar, euro, sterling terms
* Dollar languishes after ECB keeps rates at record low
* Shanghai gold exchange to launch palladium trading
(Updates prices, adds ECB decision)
By Jan Harvey
LONDON, Dec 3 (Reuters) - Gold held above $1,220 an ounce on
Thursday, close to the record high it hit in earlier trade, as
the dollar remained weak against the euro after the European
Central Bank opted to leave interest rates steady as expected.
Weakness in the U.S. currency is adding fuel to a
cross-currency rally in gold prices, sparked by talk of fresh
central bank buying and supported by fears over the inflation
outlook and a broad-based rise in commodity prices.
Spot gold <XAU=> hit a high of $1,226.10 an ounce and was at
$1,220.20 at 1321 GMT, against $1,215.90 late on Wednesday.
Saxo Bank senior manager Ole Hansen said a raft of factors,
including central bank buying and fears over the currency
markets, were supporting gold. "It has obviously been helped by
the recovery in the euro and weakness in the dollar," he said.
The metal is ignoring its usual technical indicators as it
moves further above previous record levels, he added.
"We are into new territory every time we make new highs,"
said Hansen. "It is easy to break up a percent, because there
are no levels to look for as resistance."
"The way gold is going, despite showing overbought, just
indicates that it is something one shouldn't really get in the
way of. All the forces are at play for gold."
The main price driver remains the euro-dollar exchange rate.
Weakness in the U.S. unit boosts gold's appeal as an alternative
asset and makes dollar-priced commodities cheaper for holders of
other currencies.
The euro held earlier gains against the dollar on Thursday
after the European Central Bank left interest rates steady at a
record low 1.0 percent, in line with market expectations. []
CENBANKS EYED
Analysts will be watching a news conference by ECB President
Jean-Claude Trichet following the decision to see whether he
will further outline the central bank's exit strategy from
fiscal stimulus measures.
They say Trichet has to walk a fine line, as any hints of a
rate rise would prompt traders to buy the euro, especially as
the U.S. Federal Reserve is expected to keep rates low.
Gold hit record highs in euro and sterling terms as well as
in the dollar. Euro-priced gold <XAUEUR=R> reached a peak of
812.43 euros an ounce, while gold denominated in sterling
<XAUGBP=R> hit a high of 735.20 pounds an ounce.
For graphic of gold's performance in other currencies, click
on: http://graphics.thomsonreuters.com/129/GLD_CURR1209.gif
Gold analysts say they are watching for signs of further
central bank gold buying, after India's 200-tonne purchase
announced in early November and subsequent small acquisitions by
Sri Lanka, Mauritius and Russia sparked a sharp prices rise.
A Chinese industry executive said on Thursday there is more
scope for China to increase purchasing gold, but not in the open
market and only over a longer-term period. []
Among other precious metals, silver <XAG=> was at $19.23 an
ounce against $19.20. The world's main silver exchange-traded
fund, the iShares Silver Trust <SLV>, said its silver holdings
fell 3.49 tonnes from record levels on Wednesday. []
Spot platinum <XPT=> was at $1,498 an ounce against
$1,500.50, while palladium <XPD=> was at $385.50 versus $387.50.
The Shanghai Gold Exchange is to begin trading palladium,
the exchange chairman told a conference on Thursday. "The
government approval process is nearing an end," he said.
[]
(Editing by Sue Thomas)
((jan.harvey@thomsonreuters.com; +44 207 542 7744; Reuters
Messaging: jan.harvey.reuters.com@reuters.net))
