Gold up as euro hits record high

By Lewa Pardomuan

SINGAPORE (Reuters) - Gold gained on Wednesday as the dollar tumbled to a record low against the euro, but dealers are cautious ahead of a testimony by U.S. Federal Reserve Chairman Ben Bernanke.

Silver and platinum also rose. Tokyo gold futures rebounded to track a firm cash market, while the newly launched "mini" gold contracts saw a decline in turnover.

Spot gold XAU= hit an intraday high of $667.10 an ounce, not far from last week's five-week high of $669.05, before dipping to $666.00/666.60, still higher than $664.60/665.40 late in New York on Tuesday.

"I think there has been a little bit of improvement in investor interest in gold. I certainly think the weakening in the U.S. dollar has been a factor in that," said David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney.

"Depending on what happens to the U.S. dollar, it would be possible for gold to move in above $670 an ounce in the near term," said Moore, who pegged the downside at $660.

Dealers said any signs of concerns from Bernanke about problems in the subprime mortgage market when he delivers his semi-annual testimony on monetary policy on Wednesday and Thursday may prompt more selling in the dollar and lift gold's appeal as an alternative investment.

UK-based precious metals consultancy GFMS said on Tuesday that gold will next year revisit the record high of $850 hit in 1980 as investor interest soars on a weaker U.S. dollar and lower interest rates.

The dollar slipped to 121.86 yen JPY= from around 122.20 yen in late U.S. trading on Tuesday.

The euro rallied to $1.3823 EUR=, its highest ever, on concerns about the U.S. mortgage market after Bear Stearns said two of its hedge funds that bet heavily on subprime loans now had little value.

Dealers also await data on June consumer prices and figures on housing starts and building permits.

The most active June 2008 gold futures <0#JAU:> on the Tokyo Commodity Exchange ended the morning session up 5 yen per gram at 2,639 yen, having dropped 20 yen at the close on Tuesday.

The most active December contract on TOCOM "mini" gold futures contract <0#JAM:> gained 9 yen per gram to 2,627 yen.

Turnover totalled 1,201 lots during the morning session, compared with 22,258 lots at the close on Tuesday, when the contract was launched.

"We just have to wait and see whether mini gold will consistently attract participants. But there's a bit of buying interest from Japanese investors in the cash market," said a dealer in Hong Kong.

TOCOM's mini gold contract's trading unit is 100 grams a lot, one-tenth the size of the existing gold futures contract.