* Dollar slides after report on oil pricing
* SPDR gold ETF holdings rise for second successive day
(Updates prices, adds graphics)
By Jan Harvey
LONDON, Oct 6 (Reuters) - Gold surged to a record high above
$1,040 per ounce on Tuesday, with buying fuelled by dollar
weakness after a report, later denied, that Gulf Arab states
were considering abandoning the U.S. currency for oil trade.
Both spot gold prices <XAU=> and U.S. gold futures <GCc2>
have benefited from a convergence of factors including the
dollar's decline, technical buying momentum and worries about
potential inflation as central banks struggle to emerge from
unprecedented fiscal stimulus measures.
"In an environment where interest rates are virtually zero,
the incremental cost of moving into gold is nil. It stands to
reason for investors that gold is more desirable," said Jack
Ablin, chief investment officer at Harris private bank in
Chicago.
Spot gold <XAU=> hit a historic $1,043.45 per ounce and was
last up 2.2 percent at $1,039.55, compared with $1,016.65 quoted
late in New York on Monday.
U.S. gold futures <GCc2> hit a record high, while the metal
also hit six-month highs when priced in sterling <XAUGBP=R> and
euros <XAUEUR=R>, breaking above 700 euros an ounce for the
first time since early April.
For a graphic on gold's price in dollars and euros, click
on:
http://graphics.thomsonreuters.com/109/GLD_PRCEUR1009.gif
A positive technical picture for gold fuelled buying on the
fund side, traders said. However, the weight of near-record long
positions in New York gold futures still leaves the market
vulnerable to a correction.
The dollar slipped sharply after UK newspaper the
Independent said Gulf Arab states were in secret discussions to
end the use of dollars in oil trading. []
Peter Fertig, a consultant at Quantitative Commodity
Research, said the final quarter was typically strong for gold,
due to rising jewellery demand -- a weaker than usual factor
this year -- and as the dollar is seasonally soft.
"That is the major driver of investment demand," he said.
"The speculation, even if it has been denied, that Gulf
states would like to peg oil prices to a currency basket and not
the U.S. dollar alone has been a positive factor for gold, while
weakening the dollar against other major currencies."
COMMODITIES CLIMB
Among other commodities, oil and base metals climbed on the
back of the U.S. currency weakness, which makes dollar-priced
assets cheaper for holders of other currencies. Strength in
other commodities is often reflected in gold. [] []
Physical demand for the metal also trickled through. The
largest gold exchange-traded fund, New York's SPDR Gold Trust
<GLD>, said its holdings rose 1.5 tonnes on Monday. []
Traders said they were also seeing rising demand in India,
the largest consumer of gold last year, ahead of the Diwali
festival on Oct. 19. []
Mark Cutifani, chief executive of AngloGold Ashanti
<ANGJ.J>, said he saw gold prices at $950-1,100 an ounce in the
next 12 months, and they could break $1,100 if the U.S. economy
continued to dip and investment demand rises. []
The yellow metal's gains helped lift silver to a two-week
high of $17.36 <XAU=> an ounce as investors bought it as a
cheaper proxy for gold. The precious and industrial metal <XAG=>
was later at $17.33 an ounce against $16.59. Palladium <XPD=>
hits its highest since August last year at $308.50 against
$298.50.
Platinum, the precious metal widely used in autocatalyst
manufacturing, also benefited from gold's climb, as well as the
better appetite for risk demonstrated by rising equity markets.
[]
Platinum <XPT=> was at $1,313 an ounce against $1,293.
For an INSTANT VIEW on gold's surge, click on []
Also see TAKE A LOOK-Gold hits record high on []
For graphic on gold's correlation with stocks, the dollar
and oil:
http://graphics.thomsonreuters.com/109/GLD_PRCCRR1009.gif
For a graphic on inflation adjusted gold price:
http://graphics.thomsonreuters.com/109/GLD_PRCINF1009.gif
(Additional reporting by Veronica Brown in London and Frank
Tang in New York; editing by James Jukwey)
