Gold hits 6-1/2 month high after central bank stimulus

A China Gold Tael (37.5 gram) along with other one-ounce gold coins are displayed in this illustration photo in Hong Kong June 20, 2012.

LONDON (Reuters) - Gold prices rose 1 percent on Friday to 6-1/2 month highs as expectations that central bank measures to stimulate growth would boost liquidity, fuel inflation and keep a lid on interest rates put the metal on track for a fifth straight week of gains.

A firmer tone across the financial markets also supported bullion. European shares and the euro rose, while oil rebounded from a 1-1/2 month low, as investors moved back into markets still feeling the benefits of central bank support measures.

Spot gold hit a peak of $1,787.20 an ounce and was up 0.8 percent at $1,771.14 an ounce at 1344 GMT, while U.S. gold futures for December delivery were up $14.00 an ounce at $1,784.20.

The Bank of Japan was the latest central bank to unveil easing measures this week, after the Federal Reserve announced an aggressive asset purchasing programme earlier this month and the European Central Bank unveiled plans to buy bonds of the bloc's heavily indebted countries.

The Fed move, a third round of so-called quantitative easing which will see it buy $40 billion a month in mortgage-backed debt until the outlook for the labour market improves, lifted spot gold by 2 percent in a single day.

"QE3 was a bit of a game-changer for a lot of people. People are having to think seriously about where they put their money," Ross Norman, chief executive of bullion broker Sharps Pixley, said. "Gold does seem to have taken on a life of its own now. We think we might see $1,800 in the next couple of weeks or so."

The Fed measures have boosted interest in gold exchange-traded funds, popular investment vehicles that issue securities backed by physical metal.

Holdings of ETFs tracked by Reuters, which include the SPDR Gold Trust and products operated by London's ETF Securities and Zurich Cantonalbank, are up 272,302 ounces so far this week, though they are below record highs.

GRAPHICS:

2012 asset returns: link.reuters.com/muc46s

2012 commod returns: link.reuters.com/faz36s

Gold/USD correlation: r.reuters.com/ryx52s

Gold/platinum ratio: link.reuters.com/xez92s

HIGHER CLOSES NEEDED

"With the open-ended scheme to print as much dollars as needed until the U.S. economy recovers, gold's uptrend has fewer barricades on the way at least to earlier highs," Richcomm Global Services senior analyst Pradeep Unni said.

"Charts hint at a major resistance at $1,787-$1,790, where we have failed thrice earlier," he added. "Thus, consecutive closing above $1,790 will be a necessity to avoid a correction."

Disruption in the South African mining industry, which earlier this month helped drive platinum prices to levels not seen since late February, showed signs of spreading on Friday.

Workers have embarked on an illegal strike at a mine run by world number three bullion producer AngloGold Ashanti (ANGJ.J), a company spokesman said on Friday. He said the mine has 5,000 workers and that strikers had not yet communicated their demands.

The disruption comes a day after thousands reported back for work at platinum producer Lonmin (LMI.L)(LONJ.J) after a wage hike deal was reached to end six weeks of industrial action and protest in which 45 people died.

"Headlines out of South Africa continue to capture the market's attention despite the agreement reached at Lonmin this week," UBS said in a note. "On the one hand, the end of the nearly six-week-old strike is a positive development as operations can now begin to normalise.

"But on the other hand, the company has now deemed to have set a precedent, with the workers' successful call for wage increases likely to fuel discontent elsewhere," it added. "This puts pressure on other producers to face the same calls and so places further supply risks for platinum over the weeks ahead."

Spot platinum was up 1.2 percent at $1,639.99 an ounce. Palladium was up 1.5 percent at $670.25 an ounce, while silver was up 1.4 percent at $35.04 an ounce.

Data from Chinese customs officials showed silver imports fell 3.4 pct on the year to 304,216 kg in August, while the year-to-August number dropped 25 percent.

Palladium imports fell 31.53 percent on the year, but platinum imports jumped 43 pct.

(Editing by William Hardy and James Jukwey)