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Wednesday November 25, 01:50 PM
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Gold hits record on dollar, India buying talk
By Miho Yoshikawa
TOKYO (Reuters) - Gold struck a record high for a second time this week, rising above $1,178 an ounce on Wednesday, as the dollar slipped and a newspaper reported that India was "open to buying" more gold from the International Monetary Fund.
Gold has jumped nearly 13 percent since the beginning of this month as investors poured money into the precious metal after India's central bank announced it had bought 200 tonnes of bullion from the IMF.
The central banks of Russia and Sri Lanka have separately said they had bought gold to diversify their assets.
The market gained further on Wednesday after Indian newspaper the Financial Chronicle said the Reserve Bank of India (RBI) could buy the IMF's remaining volume of gold, now the subject of negotiations.
The newspaper quoted an Indian government official as saying: "(The) RBI is an independent body and the government does not interfere in its affairs. It will get the gold if its bid is successful and at the price it has offered."
India's central bank governor, Duvvuri Subbarao, declined to comment on whether the bank would buy more gold from overseas, however. [ID:nBMA006468]
"That India report has certainly helped to push the momentum in the market today," said Darren Heathcote, head of trading at Investec Australia.
Spot gold rose to an all-time high of $1,178.60 an ounce after the India report. Prices later eased to $1,177.30 by 0632 GMT, still up 0.8 percent from the notional close in New York. Gold topped the previous high of $1,173.50 hit on Monday.
U.S. gold futures for December delivery also rose to a record high of $1,178.50. The previous record high was the $1,174.00 marked on Monday.
For an interactive timeline of prices, click:
http://graphics.thomsonreuters.com/109/GLD/GLD_TMLN1009.html
"If India is potentially buying more, then that doesn't particularly surprise me," said David Moore, commodities strategist at Commonwealth Bank of Australia in Sydney.
"At the moment, as we speak, the U.S. dollar is going through one of its soft patches again," he said.
The U.S. dollar held near a six-week low against the yen on Wednesday, while the Australian dollar gained on the greenback and the Japanese currency after an upbeat speech from a central banker and a rise in construction work.
Additional bullish news came from Vietnam's state broadcaster VTV, which said the country's central bank had granted quotas for the import of 10 tonnes of gold since lifting an import ban this month and 6.8 tonnes had already come in.
Traders said the thin trading volume ahead of Thursday's U.S. Thanksgiving holiday had served to exaggerate price moves.
"We've seen at times relatively large movements on relatively small volume because the market is literally very thin," Heathcote said.
But market sentiment remained bullish.
"The same forces are at play...underpinning it (gold) at the moment, the weaker dollar is a very big one," he said.
Kazuhiko Saito, chief analyst at Fujitomi Co Ltd in Tokyo, said investors continued to believe that other central banks might buy gold.
"Gold is being bought even when the euro falls against the dollar, and what we are seeing is an active flow of funds," Saito said.
He noted that other markets were quiet, with gold attracting most of the activity.
Japan's Nikkei stock average was up 0.4 percent on Wednesday after hitting a four-month intraday low, with tech shares and banks sold amid persistent concerns about equity funding, a rising yen and uncertainty about government economic policy.
Traders say investors are also attracted to gold, often seen as a hedge against inflation, which erodes the value of paper assets.
Money has also flowed into other precious metals investment instruments.
The world's largest silver-backed exchange-traded fund, the iShares Silver Trust, said its silver holdings rose 135.98 tonnes or 1.5 percent from the previous business day to a record 9,252.02 tonnes as of Nov. 24.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,122.371 tonnes as of Nov. 24, up 0.914 tonnes or 0.08 percent from the previous business day.
The U.S. crude oil price hovered around $76 per barrel on Wednesday, following a fall of 2 percent in the previous session after data showed the U.S. economy grew at a
slower-than-expected pace last quarter.
(Additional reporting by Risa Maeda; Editing by Sambit Mohanty)
