November 16, 2009 / 2:07 PM / 10 years ago

PRECIOUS-Gold hits record on weak dollar, momentum buying

* Dollar index slides after APEC meeting

* Call options on Dec gold futures at elevated levels

* Platinum, palladium, rhodium hit highest in over a year

(Updates prices, adds comment)

By Jan Harvey

LONDON, Nov 16 (Reuters) - Gold touched a fresh high above $1,130 an ounce in Europe on Monday as momentum from recent gains and a slide in the dollar index sparked fund buying of the precious metal.

Gains in gold boosted interest in other precious metals, with platinum, palladium and rhodium all hitting their strongest in more than a year.

Spot gold reached a peak of $1,132.95 an ounce, and was bid at $1,127.10 an ounce at 1329 GMT, against $1,118.50 late in New York on Friday.

U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange rose $11.10 to $1,127.80. Earlier they hit a record high $1,133.50.

The metal now looks poised for further gains, analysts said, with a number of call options, or rights to buy, being placed at elevated levels on U.S. December gold futures.

“There is no reason why over the next few days it can’t have a push towards that $1,200 mark before we get to the December expiry for the options positions, which everyone’s looking at,” said Tom Kendall, precious metals strategist at Mitsubishi Corp.

“There is a large bunch of $1,200 calls December expiry, which are acting as a bit of a magnet for prices at the moment.”

Further weakness in the dollar could fuel further buying of the precious metals, as funds turn to hard assets as an alternative to the U.S. currency.

The dollar index slipped as traders sold the U.S. unit in response to a lack of agreement over currencies at a summit of the Asia Pacific Economic Cooperation (APEC) forum in Singapore at the weekend.

Weakness in the U.S. currency lifted other commodities, with oil prices climbing more than $1 a barrel to their session highs and base metals rising. Gold often tracks crude prices, as it can be bought as a hedge against oil-led inflation.

SCRAP RETURNS

Demand for physical gold remained relatively lacklustre, however, with the world’s largest gold exchange-traded fund, the SPDR Gold Trust, saying its holdings fell 0.61 tonnes on Friday from the previous day.

Gold traders in India, the world’s biggest bullion market last year, shied away from fresh buying on Monday as the metal hit record highs. More scrap is being returned to the market as prices rise, they said.

Gold’s gains lifted other precious metals, with platinum hitting $1,426.50 an ounce, its highest since September 2008 and palladium reaching its strongest level in 15 months at $362.

“For a long period of time, palladium had been regarded as undervalued relative to its sister metal platinum, but during the past weeks, this undervaluation has diminished to a large extent,” said Commerzbank in a note.

“While platinum has also booked gains, reaching the mark of $1,400 an ounce for the first time in 14 months, it appreciated by just 10 percent during the past six weeks.”

Lonmin PLC, the world’s third-biggest platinum producer, expects prices of platinum group metals to gradually firm next year before shortages kick in the following year, the chief executive said on Monday.

Later, platinum was at $1,418.50 an ounce against $1,390, while palladium was at $361 against $353.50. Elsewhere rhodium hit a 13-month high at $2,250.

Silver was bid at $17.77 an ounce against $17.41.

The world’s largest silver-backed exchange-traded fund, the iShares Silver Trust, said its bullion holdings rose 30.56 tonnes, or 0.3 percent, on Friday from the previous business day to a record 8,954.08 tonnes.

Reporting by Jan Harvey; Editing by William Hardy

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