* Dollar slides to 5-month low vs basket of currencies
* Oil firm near 6-month high above $61l
* Silver hits nine-month high, tracking gains in gold
(Adds fresh highs in gold/silver, adds comment)
By Jan Harvey
LONDON, May 22 (Reuters) - Gold climbed to a fresh two-month
high of $957.50 an ounce in Europe on Friday, extending the
previous session's near 2 percent gains, as investors bought the
metal as a hedge against dollar weakness.
Silver prices posted the biggest gains among precious
metals, however, climbing to a nine-month peak of $14.79 as
investors turned to the metal as a cheaper alternative to gold.
Spot gold <XAU=> was bid at $956.95 an ounce at 1207 GMT,
against $953.40 an ounce late in New York on Thursday. U.S. gold
futures for June delivery <GCM9> on the COMEX division of the
New York Mercantile Exchange rose $6.20 to $957.40 an ounce.
Simon Weeks, director of precious metals at the Bank of Nova
Scotia, said the majority of gold's gains were dollar-related,
with investors "buying hard assets as opposed to hard currency".
"Physical (buying) has been okay, but I expect a big
increase in the open interest on the long side on the COMEX," he
added.
The dollar continued its slide on Friday, reaching a five
month trough against a basket of currencies as fears over U.S.
sovereign ratings accelerated a drive away from the unit. []
Ratings agency Moody's Investor Services said on Thursday it
was comfortable with its U.S. rating but that it was not
guaranteed forever, while Standard & Poor's cut its outlook on
Great Britain to negative from stable. []
Fears over the economic outlook and the financial system
fuelling interest in gold as a haven from risk. []
Bullion is also technically well-positioned to make further
gains, according to Calyon metals analyst Robin Bhar.
"We have closed for two days above the $935 level, so the
technical guys will be saying we now have confirmation of a
successful upside break," he said.
"We've seen in the past gold has put in some false starts
and never really achieved a clean break-out. If we close at
these sorts of levels, it will look really good on the weekly
charts, and provide even more upside potential."
Stronger oil prices, which hovered around their six-month
peak, also supported gold. Bullion can be bought as a hedge
against oil-led inflation, while rising crude prices can also
boost interest in commodities as an asset class. []
OUTFLOWS
Investor interest in gold-backed exchange-traded funds
remained relatively lacklustre, however. Holdings of the largest
gold-backed ETF, the SPDR Gold Trust <GLD>, were unchanged for a
sixth consecutive session on Thursday.
London's ETF Securities noted an outflow from their Physical
Gold ETF <PHAG.L>. Its holdings declined nearly 69,000 ounces or
2.5 percent on Thursday.
Among other precious metals, silver <XAG=> jumped to a fresh
nine-month high on Friday, also benefiting from dollar weakness.
The metal has risen 5.7 percent so far this week. Spot silver
<XAG=> was bid at $14.72 an ounce against $14.51.
Strong ETF buying has been a key factor boosting silver
prices in recent weeks. ETF Securities' silver <PHAG.L> holdings
were at a record 19.462 million ounces on Thursday.
"We expect the metal to continue to benefit from inflation
fears and investor diversification, and think silver is brewing
for an upside push of its own, potentially targeting the $16.40
level," said TheBullionDesk.com analyst James Moore in a note.
Platinum <XPT=> was quoted at $1,146 an ounce against
$1,148.50 late on Thursday, while palladium <XPD=> was at $233
an ounce against $231.
Fellow platinum group metal rhodium dipped $50 to $1,400 an
ounce, giving up some of this week's earlier gains.
(Reporting by Jan Harvey; Editing by William Hardy)
