November 9, 2010 / 5:24 AM / 7 years ago

Gold hits new high on inflation worry, Europe debt

<p>Bars of 250 gram fine gold are stored at a plant of gold refiner and bar manufacturer Argor-Heraeus SA in the southern Swiss town of Mendrisio, November 13, 2008.Arnd Wiegmann</p>

SINGAPORE (Reuters) - Gold rose to a record high for the fourth straight session on Tuesday, as inflation worries and euro zone sovereign debt woes continue to lure investors to precious metals.

Spot silver hit a new 30-year high just below $28, and palladium extended gains to a new nine-year peak of

$712.75.

Spot gold rose to an all-time high of $1,412.75 an ounce, before easing to $1,410.45 by 0339 GMT.

"Liquidity is being thrown into the market place, the dollar is being debased as a way the U.S. government can get out of debt obligations, while Asian central banks keep buying dollars and keep their currencies cheap. Hard assets are just going to continue to benefit," said a Singapore-based trader.

"There is a good arguement for these metals go to up. There is a lot of momentum to buy."

The target for this round of rally could be $1,475 or even $1,500, in the next three weeks, the trader added.

Holdings in the world's largest gold-backed exchange traded fund, SPDR Gold Trust, gained 2.43 tonnes to 1,294.196 tonnes, their highest so far this month.

Gold is expected to rise towards $1,430 per ounce, as the uptrend is steady and a wave "5" is advancing, said Wang Tao, a Reuters technical analyst.

For a graphic showing the 24-hour gold technical outlook, see:

here

The dollar was steady, while the euro traded just below 1.3900 after having fallen for a second straight session, weighed by disappointing German data and heightened concerns about peripheral euro zone debt.

But the dollar has weakened steadily since June against a basket of currencies on concerns about U.S. monetary and fiscal policies.

EU Economics Commissioner Olli Rehn said on Monday he had not discussed any need for a European Union bailout with Ireland, adding he believed market confidence would be restored once the country published its four-year plan to cut debt.

Gold prices have climbed nearly five percent since the U.S. Federal Reserve announced last Wednesday its plans to purchase $600 billion worth of government bonds, and silver 13 percent.

"Anticipation on inflation, in addition to existing inflation in some countries, has fuelled a sharp rally across the board in commodities," said Hou Xinqiang, an analyst at Jinrui Futures in China.

"We don't see any chance that the U.S., euro zone nations, or Japan would pull out of easy monetary policies any time soon, so inflation worries will continue to be a reason for speculative trades."

Seasonal high demand is also supporting prices, he said.

"We saw some buying this morning. And not stop-loss buying, but purchases based on the belief that prices will continue to rise," said a Singapore-based dealer.

Scrap selling is scant, and both customers and speculators remained cautious ahead of the group of 20 meeting on Thursday and Friday, which may give fresh clues on the direction of the dollar, said the dealer.

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