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GLOBAL MARKETS-Equities fall, gold hits record on wobbly dollar

Published 11/12/2009, 07:57 AM
AUD/USD
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* Gold hits record high above $1,120, then retreats

* Stocks weaken, Wall Street set for losses

* Dollar firmer but still near 15-month lows

By Jeremy Gaunt, European Investment Correspondent

LONDON, Nov 12 (Reuters) - Gold rose above $1,120 an ounce to a fresh record high before retreating on Thursday and equities weakened, particularly in emerging markets.

Wall Street looked set for losses at the open. The dollar gained against other currencies but remained close to 15-month lows.

Gold prices pushed to the record high in part because of recent dollar weakness . A weak U.S. currency makes metals priced in dollars less expensive for holders of other currencies.

"What is interesting is that we move from high to high every day (in dollar terms), but in euro terms, we're still far away from the old high," said Michael Kempinski a trader at Commerzbank.

Other commodities were also supported by the weak dollar.

The dollar was up 0.3 percent against a basket of major currencies <.DXY>, but still was very close to 15-month lows.

Prospects that U.S. interest rates will remain at negligible levels for some time, have hit the currency. It is down 1.2 percent against the basket this month for a 7.1 percent slide over the year to date.

With a light economic data calendar on Thursday, apart from strong Australian jobs numbers that boosted the Aussie dollar to a 15-month high, the broader market was left to consolidate.

"The dollar is lower mainly because interest rates are low, so there's no support there," said Marcus Hettinger, currency strategist at Credit Suisse in Zurich.

The euro was down 0.4 percent at $1.4911 . It had touched $1.5049 on trading platform EBS on Wednesday, within sight of the 2009 high of just above $1.5060 hit last month.

STOCKS WEAKER

World stocks were weaker, with the MSCI all-country world index <.MIWD00000PUS> down 0.4 percent and the emerging market component <.MSCIEF> off 1 percent.

European shares were also lower with the FTSEurofirst 300 <.FTEU3> index down 0.1 percent.

Investors remain fairly bullish, however, with signs that at least parts of the world economy are gaining traction.

The Baltic Dry Freight Index <.BADI>, which can be a proxy for world trade patterns, rose sharply, pushed up by freight of iron ore to China.

"A 10th straight increase for the Baltic Dry and a 15-month high for AUD/USD (Australian/U.S. dollar) do not imply that sentiment is about to turn over," Kenneth Brough, an economist at Lloyds TSB, said in a note.

Euro zone government bonds yields fell as stock weakness boosted demand. (Additional reporting by Jamie McGeever; editing by Chris Pizzey)

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