PRECIOUS-Gold rushes to record; investors seek insurance

Thu Sep 16, 2010 11:34am EDT

* Will the market see more QE from Fed?

* Silver marks fresh peak, approaches $21 an ounce

* Analysts eye $1,300, $1,350 as upside targets

(Adds comment, updates prices)

By Pratima Desai

LONDON, Sept 16 (Reuters) - Gold swept to a record high above $1,275 per ounce on Thursday, as currency market jitters and broader economic uncertainty attracted more investors to the metal's safe-haven credentials.

Strong investment demand pushed spot silver XAG=, often seen as a cheap proxy for gold, to $20.75 an ounce -- its highest level since March 2008.

Spot gold XAU= was bid at $1,273.75 a troy ounce at 1450 GMT, compared with $1,265.65 an ounce at the close on Wednesday.

Earlier on Thursday it hit a record $1,277.70 an ounce. U.S. December gold futures also rose to a historic high GCZ0.

"It's an insurance policy at the end of the day," said Robin Bhar, analyst at Credit Agricole. "All the ingredients are still there -- all the uncertainty and fear -- to keep gold underpinned."

The dollar fell against a basket of major currencies .DXY, bolstering the case for bullion, with currency markets struggling to settle after Japan's huge intervention to weaken the yen a day earlier. World stocks also slipped. <MKTS/GLOB>

Analysts and traders are looking to $1,300 an ounce as a major psychological marker, with $1,350 seen as the next potential target. But some are sceptical about the real strength of the rally.

"I'm quite surprised we are here really, gold seems to be playing follow the leader with silver... and the dollar's weakness," Simon Weeks, head of precious metals at Scotia Mocatta, said.

The move was also not being confirmed in bullion priced in other currencies such as the euro XAUEUR=R and Swiss Franc XAUCHF=R, which would normally signal a potent impulse higher, he said.

QE11 EYED

A potential trigger for further gains could come from the U.S. Federal Reserve, which meets on Sept. 21 and could announce further quantitative easing to stave off economic slowdown in the world's largest economy.

"If the Fed says next week it is going to do more quantitative easing... the inflation bugs will have a field day," said David Thurtell, analyst at Citi, who thinks gold could see the $1,300 level next week.

Quantitative easing is normally a process by which central banks attempt to pump money into the economy by buying bonds. Excess liquidity could lead to too much money chasing too few goods or services, resulting in upward price pressures.

Also on the agenda is the U.S. fiscal outlook with the start of the new financial year in the United States. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For an analysis on the use of gold as a hedge against inflation and deflation, click on: [ID:nLDE68F1LH] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

INVESTMENT

The world's largest gold-backed exchange-traded fund, the SPDR Gold Trust (GLD.P), said its holdings fell to 1,294.746 tonnes by Sept. 15 from 1,298.698 tonnes on Sept. 14. [GOL/SPDR] But the fall follows a six-tonne rise the previous day.

Positive macro data is also partly behind the run higher in industrial precious metals such as silver XAG=, platinum XPT= and palladium XPD=. Spot silver was bid at $20.72 an ounce from $20.49 late on Wednesday.

Spot platinum was bid at $1,612.50 an ounce from $1,604.50 in New York late on Wednesday, when it touched a four-month high of $1,619.50. Palladium was little changed at $554.50.

On the mining front, South Africa's National Union of Mineworkers (NUM) said on Thursday that workers at Northam Platinum (NHMJ.J) had rejected the company's 8.5 percent revised wage offer and would continue with their strike action. (Additional reporting by Veronica Brown; editing by Sue Thomas and Lin Noueihed)

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