Gold at record for 6th day on monetary easing hopes

Reuters:

Gold extended its record-breaking rally to a sixth straight day on Friday, rising near 1 per cent as comments from Federal Reserve officials and US data reinforced expectations of further monetary easing.

The US dollar fell to a six-month low versus the euro after New York Fed President William Dudley said more Fed action to boost growth will likely be needed if the economic outlook doesn't improve. Data showing US manufacturing growth slowed and inflation remained subdued in August aided the case for more monetary policy easing.

The rally carried over to the other more volatile precious metals that outpaced gold's gains, with silver rising nearly 2 per cent to its highest since 1980 and platinum to a four-month peak.

Spot gold scaled an all-time high of $US1320.80 an ounce and was up 0.8 per cent $US1316.35 an ounce in late New York trade. US gold futures for December delivery settled up $US8.20 at $US1317.80.

Bullion was 1.5 per cent higher for the week, posting its biggest three-week rally since mid-May.

Gold rose 6 per cent in the third quarter, its eighth consecutive quarterly gain, with dealers saying the two-year rally looked resilient on the growing belief that the Fed will decide next month to pump billions of dollars into the economy through buying government debt, or quantitative easing.

"What you are seeing is anticipation of the Fed coming down with another round of quantitative easing. The question at this point is what's the size of it. I would look at November, December for the next phase of monetizing all the debt that we put out there," said Zachary Oxman, managing director at TrendMax Futures.

The US dollar plunged to a eight-month low against a basket of major currencies after two Fed policymakers said that more action would likely be needed unless the outlook improves in the clearest calls yet by Fed officials to pump more cash into the economy.

US data also showed both consumer and construction spending rose more than expected in August, but investment in private projects fell to its lowest level in more than 12 years.

With analysts expecting the US dollar to extend losses to the end of the year, gold is expected to benefit from demand as an alternative currency.

The prospect prompted investors to buy bullion as a hedge against the possibility of a double-dip recession or inflation.

Gold looks poised to test above $US1500 an ounce over the next three months, supported by bullish wave pattern and a Fibonacci projection analysis, a Reuters technical analyst said.

Holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, dipped however by just under 1 tonne to 1304.776 tonnes.

Silver hit a 30-year high at $US22.15 and was trading up 1.6 per cent at $US22.04 an ounce. The metal has outperformed gold this year, rising 30 per cent against gold's 20 per cent climb.

The gold-to-silver ratio, which shows how much silver an ounce of gold can buy, slipped below 60, its weakest level since January.

However, UBS analyst Edel Tully said in a note that silver may be more vulnerable to a near-term correction than gold.

‘‘Much of silver's move having been technically driven...A pullback would be particularly unsurprising because silver is notoriously volatile, its price regression typically being a lot more violent than gold's."

Gold's strength lifted platinum to a 4-1/2 month peak at $US1684.50. It rose 1.4 per cent to $US1674.50 an ounce, while palladium gained 0.6 per cent to $US567.50.