* Gold, commodities surge on inflation fears
* US stocks zigzags after touching multiyear highs
* Euro zone debt worries hangs over currency market
(Updates with European stocks' close)
By Manuela Badawy
NEW YORK, Nov 9 (Reuters) - Gold surged to another record
and oil rose to a two-year high on Tuesday, driven by inflation
expectations even as the dollar rebounded against the euro.
The Federal Reserve's decision to undertake more stimulus
by printing more money to buy $600 billion in U.S. bonds has
hit the dollar of late, leading many to worry about inflation.
Commodities, which are priced in dollars, benefit from the
weakness of the U.S. currency.
With an economy that is growing at just a 2 percent
annualized clip and an unemployment rate that remains stuck at
9.6 percent, the Fed decided to flood more dollars into the
financial markets to boost the anemic recovery.
Investors fear the Fed's policy will lead to high inflation
and worry that low interest rates in the United States risk
fueling asset bubbles in other countries and destabilizing
currencies.
"We have a combination: inflation fears, currency market
uncertainty, fears about the financial strength of some
countries," said Alexander Zumpfe of Heraeus Metals.
Heavily indebted countries such as Ireland, Portugal and
Spain are back in the headlines, with the cost of protecting
their government debt against default rising substantially in
the past week.
The renewed concerns weighed on the euro <EUR=>, which hit
its lowest in more than a week versus the dollar. It was last
trading down 0.37 percent at $1.3869.
Heavy Asian and Middle Eastern buying helped lift the euro
off a $1.3823 session low, traders said, but it stalled below
$1.40. Some traders also closed long positions against the
dollar ahead of year-end book-closing.
The dollar was up against a basket currencies, with the
U.S. Dollar Index <.DXY> rising 0.21 percent at 77.183. Against
the Japanese yen, the dollar <JPY=> was down 0.04 percent at
81.13.
U.S. equities slipped after five weeks of gains, but an
index of gold and silver miners' shares <.XAU> hit an all-time
high. Shares of Barrick Gold <ABX.N> rose 2.5 percent to
$52.50.
The Dow Jones industrial average <> was down 35.27
points, or 0.31 percent, at 11,371.57. The Standard & Poor's
500 Index <.SPX> was down 3.69 points, or 0.30 percent, at
1,219.56. The Nasdaq Composite Index <> was down 4.89
points, or 0.19 percent, at 2,575.16.
European shares <> shrugged off euro zone debt
concerns to close at their highest level in more than two years
with the pan-European FTSEurofirst 300 <> index of top
shares up 0.6 percent at 1,117.46 points, its highest close
since September 2008.
The MSCI all-country world equity index <.MIWD00000PUS>
eased 0.03 percent. Emerging market stocks <.MSCIEF> were up
0.16 percent.
"Quantitative easing, decent macroeconomic data and
valuations have helped equities to move higher. Earnings have
also played a big role," said Klaus Wiener, head of research at
Generali Investments, in Cologne.
"We are in a year-end rally and I don't see any disturbance
from the macro data side. The only thing which could be a bit
of a problem is the situation in countries like Ireland but
this is not being perceived as something which could derail the
whole monetary union project."
COMMODITIES RISE, G20 EYED
Gold's rise was assisted by the Fed's decision to print
dollars to buy U.S. government debt, which weakened the dollar
and spurred commodity prices higher. Gold has gained nearly 30
percent this year so far.
Spot gold prices <XAU=> rose $11.85, or 0.84 percent, to
$1,420.90 an ounce, while silver <XAG=> touched $28.46 an
ounce, the highest since March 1980.
U.S. crude oil <CLc1> rose 4 cents, or 0.05 percent, to
$87.10 per barrel, after touching $87.63, its highest since
October 2008 following the release of the International Energy
Agency's long-term energy outlook, in which it said oil prices
might exceed $100 a barrel in 2015 and $200 in 2035.
U.S. government bond prices fell after data on U.S.
wholesale inventories showed a larger than expected rise,
fueling questions about whether inventories were gathering dust
on shelves.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 11/32, with the yield at 2.5974 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 2/32, with the yield at
0.4228 percent. The 30-year U.S. Treasury bond <US30YT=RR> was
down 35/32, with the yield at 4.1915 percent.
(Additional reporting by Edward Krudy in New York and Pratima
Desai, Atul Prakash and Maria Golovnina in London; Editing by
Kenneth Barry)
