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RTRS: UPDATE 3-Gold soars on flight to safety, weaker dollar
 
* Gold rises to record high in euro terms

* Dollar extends losses after Federal Reserve action (Updates prices, adds comment)

By Jan Harvey

LONDON, Oct 7 (Reuters) - Gold climbed, hitting a new all-time high in euro terms according to Reuters data, as fears over the outlook for the financial sector spurred buying, and as the dollar weakened against the euro.

Rising oil prices are also underpinning gains.

Spot gold rose to a session high of $890.60 before settling back to trade at $878.00/880.00 at 1424 GMT, up from $857.45 an ounce in late New York trade on Monday.

In euro terms, gold rose to a new record of 654.22 euros an ounce, up from 635.29 euros late on Monday.

"Gold's strength has been masked by the dollar," VM Group analyst Matthew Turner said. "The price today in euros is at an all-time high. Coin sales have been soaring and ETF demand is strong. There is a lot of demand out there for gold."

Firmer oil prices also support gold. Crude rose more than $3 a barrel after a 100 basis point interest rate cut by the Bank of Australia raised hopes that other policymakers would follow suit, potentially boosting the economic outlook and consequently demand for crude. [IDnSP97566]

A further spike in oil prices on reports that a U.S. warplane violated Iran's territory sent gold to session highs. However, both oil and gold retreated when the reports were downplayed. [ID:nSP97566]

The dollar, a key external driver of gold,extended losses against the euro after steps from the Federal Reserve to backstop the U.S. commercial paper market boosted risk appetite. [ID:nN07449746]

The Fed said it is creating a special-purpose facility to buy commercial paper, in an emergency move designed to calm chaotic financial markets. [ID:nN07447246]

Gold typically moves in the opposite direction to the dollar, as it is often bought as an alternative investment to the U.S. currency.

MACRO SUPPORT

Support for gold prices from the rocky economic situation looks set to remain firm, analysts say, with prices potentially climbing further if the outlook worsens.

"Given the uncertainty and risk that is being generated in the financial markets, it looks very likely that more institutional safe-haven buying might enter the arena, pushing prices to new highs," said ScotiaMocatta analysts.

Physical demand for coins and bars is also strong, while jewellery buying is expected to increase going into the fourth quarter.

Platinum and palladium prices also rose, with platinum returning to the $1,000 an ounce level for the first time in three sessions.

Platinum was quoted at $1,005.50/1,025.50, up from $961.50 late in New York on Monday. Palladium was at $199/209 an ounce, up from $194.

Among other precious metals, silver was at $11.53/11.63 an ounce. Late in New York on Monday it was quoted at $11.01 an ounce.

(Reporting by Jan Harvey; editing by Michael Roddy)

Source