Gold rallies to fresh record, stocks up

NEW YORK (Reuters) - Gold climbed to a record on Thursday as the dollar struggled, while U.S. stocks settled higher after Alcoa (AA.N) began the third-quarter earnings season with an unexpected profit.

Major U.S. equity indexes rose nearly 1 percent, led by Alcoa, a day after the Dow component and the largest American aluminum producer posted its first profit after a string of quarterly losses. Alcoa cited improving metal prices and cost savings as the main reasons for its profitable quarter.

Alcoa is the first major company to release earnings in the U.S. third-quarter reporting season.

Its profit surprise also played a factor in world equity markets on Thursday, as investors have been scouring for signs of any fundamental improvement in organic growth. The MSCI world equity index .MIWO00000PUS rose 1.32 percent to 1,137.84, near the year's high of 1,150.42.

For their part, the Dow Jones industrial average .DJI was up 61.29 points, or 0.63 percent, at 9,786.87, while the Standard & Poor's 500 Index .SPX was up 7.90 points, or 0.75 percent, at 1,065.48. The Nasdaq Composite Index .IXIC was up 13.60 points, or 0.64 percent, at 2,123.93.

But gold stole the spotlight again.

The yellow metal topped $1,060 per ounce to mark a record high for the third session in a row, versus its late New York Wednesday quote of $1,043.70. It closed the day at $1,055.45.

The move in spot bullion has primarily been driven higher by the weakening dollar, which makes the dollar-denominated metal more attractive to investors.

In some currencies -- the high-flying Australian dollar, for example -- gold has actually fallen in price this year.

"Investors are turning toward gold as a hedge in dollar weakness," said Adrian Koh, an analyst at Phillip Futures in Singapore.

The dollar was down against a basket of major trading-partner currencies, with the U.S. dollar index down 0.69 percent at 75.966, a 14-month low and below a previous session close of 76.494.

The currency has been hit by a combination of expectations that U.S. interest rates will stay low for some time and a belief that the global economy is on the mend, easing the motivation behind last year's flight to dollar safety.

The euro was up 0.63 percent at $1.4778 from a previous session close of $1.4685, while against the Japanese yen, the dollar was down 0.15 percent at 88.45 from a previous session close of 88.580.

The Australian dollar jumped 1.7 percent to US$0.9063, still benefiting from this week's rate hike. It has now gained nearly 28 percent against the U.S. dollar this year.

MARKETS ON A HIGH EVERYWHERE

Emerging markets also got a boost from rallying world indexes. The MSCI Emerging Markets .MSCIEF was up 1.41 percent at 941.95, after earlier climbing to 942.32, a new high for the year.

The index has gained 65 percent so far this year.

The pan-European FTSEurofirst 300 .FTEU3 was up 1.26 percent at 1,001.19, boosted in part by commodity-related stocks as well as the bullish sentiment over Alcoa's earnings.

"There is a general sense that 'Quarter 3' earnings are going to be more positive than expectations," said Bernard McAlinden, market strategist at NCB Stockbrokers.

U.S. Treasury debt prices came under pressure late Thursday following an auction of $12 billion of reopened 30-year bonds.

The benchmark 10-year U.S. Treasury note was down 18/32, with the yield at 3.2513 percent, while the 2-year U.S. Treasury note was down 2/32, with the yield at 0.88 percent.

At the longer end of the yield curve, the 30-year U.S. Treasury bond was down 49/32, with the yield at 4.0871 percent.

(Additional reporting by Jeremy Gaunt; Editing by Chizu Nomiyama)