* Gold pares gains after Japan quake weighs on markets
* ECB's first rate hike since 2008 stirs inflation worries
* Technical patterns fuel bullishness despite weak volume
* Coming up: US gov't could shut down by midnight Friday
(Recasts, updates prices, market activity; adds comments, link
to graphic)
By Frank Tang
NEW YORK, April 7 (Reuters) - Gold hit a record high for a
third straight session Thursday on inflation worries and
expectations that the European Central Bank's first rate hike
since the 2008 financial crisis would weaken the dollar.
Bullion came off its all-time high $1,464.80 an ounce after
news another strong earthquake hit Japan. The precious metal
was up 0.1 percent in late trade after retreating from the
session high along with global equities and agricultural
commodities.
Trading in the U.S. futures market was half the average,
but a bullish technical formation more than offset low volume.
"You're back to a dollar story for the first time in a long
time." said Frank McGhee, head precious metals trader of
Integrated Brokerage Services. "Gold prices and the dollar both
benefit from that rate hike because it increases the
differentials between euro zone and the U.S. interest rates."
Rising interest rates generally are negative for gold, but
investors bet the dollar would weaken after the ECB rate hike.
Spot gold <XAU=> gained 0.1 percent to $1,459 by 2:41 p.m.
EDT (1841 GMT). U.S. gold futures for June delivery <GCM1>
settled up 0.1 percent at $1,359.30 an ounce.
The traditional inverse correlation between gold and the
dollar appeared to be strengthening to a negative 0.8, as gold
hit successive records. A correlation of minus 1 indicates a
perfect inverse link, while a correlation of plus 1 indicates
that both are moving in perfect tandem. (Graphic:
http://link.reuters.com/vus88r)
The ECB raised rates by 25 basis points to 1.25 percent to
counter inflation pressure. Gold has risen more than 2 percent
this week, benefiting from rallies in crude oil and corn and as
Portugal requested a European Union rescue package.
"Of course the ECB will be vigilant in monitoring inflation
developments very closely. But it is more inflation
expectations that made the ECB concerned, and less the actual
increase" in inflation, said Peter Fertig, a consultant at
Quantitative Commodity Research.
ECB President Jean-Claude Trichet said the rate hike was
not necessarily the start of a series, disappointing some who
had expected a more hawkish tone. []
The gold market is also monitoring the U.S. budget crisis.
The mood shifted from optimism to pessimism as Democratic and
Republican leaders in the U.S. Congress sought a deal to avert
a looming U.S. government shutdown. []
Gold has benefited from worries that growing U.S. fiscal
imbalance would lead to inflation.
TECHNICAL PATTERN SUPPORTS
On charts, gold notched slim gains amid below-average
volume despite a third consecutive record high.
"A neutral day with light volume, after the kind of run
that we've seen, is not detrimental to the market or the chart
pattern at all," said Scott Meyers, senior analyst at MF
Global's Pioneer Futures division.
Gold posted a higher high and higher low, a bullish
technical pattern referring to Thursday's high and low above
the previous session's, Meyers said.
Among other precious metals, silver <XAG=> gained 0.3
percent at $39.56 an ounce, just off the previous session's
31-year high at $39.75.
Silver has not shaken its image of an unpredictable metal
with high volatility and chronic oversupply, but investors seem
set on driving prices beyond the recent 31-year high.
[]
On fundamentals, industrial demand for silver is expected
to rise less than 10 percent this year, after prices more than
doubled to 31-year highs since late 2010, the head of metals
research and consultant GFMS said on Thursday. []
Platinum <XPT=> was down 0.2 percent to $1,783.50 an ounce,
while palladium <XPD=> shed 0.5 percent to $774.47.
Prices at 2:41 p.m. EDT (1841 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCM1> 1459.30 0.80 0.1% 2.7%
US silver <SIK1> 39.552 0.165 0.0% 27.8%
US platinum <PLN1> 1790.60 -7.20 -0.4% 0.7%
US palladium <PAM1> 780.25 -4.35 -0.6% -2.9%
Gold <XAU=> 1459.00 2.00 0.1% 2.8%
Silver <XAG=> 39.56 0.13 0.3% 28.2%
Platinum <XPT=> 1783.50 -3.95 -0.2% 0.9%
Palladium <XPD=> 774.47 -3.63 -0.5% -3.1%
Gold Fix <XAUFIX=> 1459.50 3.00 0.2% 3.5%
Silver Fix <XAGFIX=> 39.51 -12.00 -0.3% 29.0%
Platinum Fix <XPTFIX=> 1780.00 7.00 0.4% 2.8%
Palladium Fix <XPDFIX=> 778.00 6.00 0.8% -1.6%
(Additional reporting by Jan Harvey in London)
