* Technical momentum builds after Indian gold acquisition
* Dollar weakens ahead of Fed, adding to upward pressure
* Palladium rises 2 percent, lifted by gold, fundamentals
(Updates throughout, previous TOKYO)
By Jan Harvey
LONDON, Nov 4 (Reuters) - Gold hit record highs above $1,095
an ounce on Wednesday as dollar weakness added to momentum lent
to the market by India's purchase of 200 tonnes of gold from the
IMF to push prices through key technical resistance levels.
Gold is now poised to target the psychological $1,100 an
ounce level, dealers said. For graphic on gold's rise, click on:
http://graphics.thomsonreuters.com/109/GLD/GLD_TMLN1009.html.
Spot gold struck a high of $1,095.05 an ounce and was bid at
$1,093.55 an ounce at 1055 GMT, against $1,084.50 late in New
York on Tuesday.
U.S. gold futures on the COMEX division of the New York
Mercantile Exchange also hit record highs at $1,096.20 an ounce.
"At the moment, there is technical buying on the back of
yesterday's rally in the aftermath of the IMF/India
transaction," said Alexander Zumpfe, a trader at Heraeus.
"The transaction... reduced the amount of gold that can be
sold under the CBGA by 50 percent for the first year.
"Technically, it is looking good and it seems like the
market wants to test $1,100 now," he added.
The International Monetary Fund said on Tuesday it had sold
200 tonnes of gold to the Reserve Bank of India for $6.7
billion, quietly executing half of a long-planned bullion sale
that had threatened to slow gold's ascent. []
The news sparked a rally that pushed gold through key
technical levels, fuelling fresh buying.
Market watchers are now speculating over the destination of
the remaining 403 tonnes of gold the IMF has to sell.
"(The) implication is that at least one other central bank
may be negotiating to buy gold from the IMF," John Meyer, an
analyst at Fairfax, said in a note.
Weakness in the dollar in early European trade has added to
this momentum, dealers said.
The dollar index <.DXY>, which measures the U.S. currency's
performance against a basket of six major currencies, retreated
from a one-month high on Wednesday as traders braced for a
policy decision from the Federal Reserve. []
BULLISH
Gold's ability to rally to record highs despite dollar
strength on Tuesday has cheered the market, traders say.
"For the first time in a while gold rallied without the
influence of the dollar, which is very bullish," said Afshin
Nabavi, head of trading at MKS Finance.
Gold typically moves in the opposite direction to the
dollar. Strength in the U.S. unit makes gold, like all
dollar-priced commodities, more expensive for holders of other
currencies, and cuts its appeal as an alternative asset.
Oil prices, strength in which also supports gold as a hedge
against oil-led inflation, also rose on Wednesday, after a
report showed a surprise fall in U.S. crude stocks.
Demand for physical gold showed some signs of life, with
holdings of the largest bullion exchange-traded fund, New York's
SPDR Gold Trust <GLD>, rising nearly 5 tonnes. []
However, gold buying in India, the world's biggest bullion
consumer last year, was weak as India gold futures also hit
record highs, while dealers reported a rise in scrap sales as
consumers took advantage of higher prices. []
Among other precious metals, spot silver <XAG=> was bid at
$17.45 an ounce against $17.20, tracking gold. Platinum <XPT=>
was at $1,359 an ounce against $1,355.50.
Palladium <XPD=> was the biggest percentage riser of the
precious metals, up nearly 2 percent at $331.50 against $324.50.
The metal is benefiting from expectations industrial demand
for the autocatalyst material may pick up as car buying recovers
in the United States and China, dealers said.
(Editing by James Jukwey)
