* Investor demand strong on renewed central bank interest
* Gold in euro terms hit highest level since March
* Supply worries boost sentiment on strike at Gold Fields
(Recasts, updates comments, closing prices, market activity,
adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Nov 11 (Reuters) - Gold hit record highs
near $1,120 an ounce Wednesday, stirred by renewed buying
interest by central banks, and bullion should benefit from
expectations that an erratic economic recovery will keep U.S.
interest rates low.
The metal is now poised for more gains, analysts said, with
the weak dollar helping gold build on a rally that began last
week after the IMF sold 200 tonnes of bullion to India's
central bank, raising the prospect of more official sector
buying.
Joseph Foster, manager of Van Eck International Investors
Gold Fund, said that the gold market is currently being driven
by worries about paper currency depreciation and potential
inflation.
"Firming commodities prices and the liquidity being created
by current monetary policies could eventually bring much higher
levels of inflation," said Foster, who manages more than $800
million mutual fund assets.
Spot gold <XAU=> hit a high of $1,118.35 an ounce earlier
in the session. Bullion was at $1,116.95 an ounce at 2:29 p.m.
EST (1929 GMT), versus $1,105.30 late on Tuesday.
U.S. December gold <GCZ9> settled up $12.10, or 1.1
percent, at $1,114.60 an ounce on the COMEX division of the
NYMEX.
The dollar index initially fell a quarter of a percent to a
15-month low and the euro rose to a two-week peak within sight
of last month's 2009 high of just over $1.5060. []
Gold held gains in spite of the dollar's bounce in the late
sessions.
Analysts said the dollar was smarting after Fed officials
said on Tuesday that high unemployment and sluggish consumer
spending were risks to recovery in the U.S. economy, which may
keep the Fed funds rate low. [].
Weakness in the unit boosts gold's appeal as an alternative
asset and makes dollar-priced commodities cheaper for holders
of other currencies.
Gold prices also rose in nondollar terms. Euro-denominated
gold <XAUEUR=R> reached its highest level since March at 746.37
euros.
BARRICK SEES RECORD MARGINS
Barrick Gold Corp <ABX.TO>, the world's biggest gold
producer, told Reuters it sees the potential for record margins
in the fourth quarter as gold prices hit new peaks and costs
are stable or lower. []
In major gold producer South Africa, the country's biggest
union said it had received the go-ahead from authorities for
its workers to strike at Gold Fields <GFIJ.J> over a disputed
recruitment assessment method. []
Vietnam's central bank said it will allow imports of gold
-- banned since May of last year -- after bullion prices rose
sharply in recent days, potentially opening up a new source of
demand. []
But with the prospect of persistent dollar weakness
boosting fund interest in gold and further central bank
purchases seen as a distinct possibility, the outlook for gold
prices is positive.
U.S. investment bank Goldman Sachs said on Tuesday gold
could rise to record highs in a range from $1,150 to $1,200 an
ounce, driven by falling real interest rates and renewed buying
interest by central banks. []
Among other precious metals, spot silver <XAG=> was at
$17.54 an ounce against the previous session's late quote of
$17.32 in New York, tracking gold higher, while platinum <XPT=>
was at $1,363.50 an ounce against $1,349.50.
Palladium <XPD=> was at $342.00 against a late Tuesday New
York quote of $331.50. Earlier it touched $346.75 an ounce, the
highest level since August 2008, on fund buying and strong
Chinese car sales data. []
For graphic of gold's performance in different currencies,
click on:
http://graphics.thomsonreuters.com/119/CMD_GLDCUR1109.gif
For graphic of gold in relation to inflation expectations,
click on:
http://graphics.thomsonreuters.com/119/GLD_TPSS1109.gif
Close Change Pct 2008 YTD
Chg Close % Chg
US gold <GCZ9> 1114.60 12.1 1.1 884.3 26.0
US silver <SIZ9> 17.537 0.315 1.8 11.295 55.3
US platinum <PLF0> 1369.60 18.40 1.4 941.50 45.5
US palladium <PAZ9> 345.40 10.20 3.0 188.70 83.0
Prices at 2:28 p.m. EST (1928 GMT)
Gold <XAU=> 1116.80 11.50 1.0 878.20 27.2
Silver <XAG=> 17.55 0.23 1.3 11.30 55.3
Platinum <XPT=> 1364.50 15.00 1.1 924.50 47.6
Palladium <XPD=> 341.95 10.450 3.2 184.50 85.3
Gold Fix <XAUFIX=> 1115.25 0.50 0.0 836.50 33.3
Silver Fix <XAGFIX=> 17.63 37.00 2.1 14.76 19.4
Platinum Fix <XPTFIX=> 1365.00 0.00 0.0 1529 -10.7
Palladium Fix<XPDFIX=> 340.00 2.00 0.6 365.0 -6.8
(Additional reporting by Pratima Desai and Humeyra Pamuk in
London; editing by Jim Marshall)
