(Recasts, adds quotes, changes prices, dateline, pvs SINGAPORE)
By Atul Prakash and Anna Ringstrom
LONDON, March 14 (Reuters) - Spot gold rose to within
striking distance of the $1,000 mark on Friday, a level already
broken on the U.S. futures market, as a record low dollar
boosted the metal's appeal as an alternative investment.
Spot gold <XAU=> rose to a high of $998.70 an ounce before
easing to $997.00/997.80 at 1106 GMT, against $991.00/991.80
late in New York on Thursday, when it powered to a record of
$999.90, according to Reuters' charts.
U.S. gold futures hit an historic high of $1,001.50 on
Thursday, while the London Bullion Market Association said its
members confirmed the spot metal also breached the $1,000-level
on some trading platforms the previous day. The over-the-counter
market uses different systems to trade the metal.
"It's a continuation of the same drivers that have been
driving gold -- the weak dollar, inflationary concerns, and the
biggest factor is people's fears over the financial system,"
said Robin Bhar, metals analyst at UBS Investment Bank.
"There is more scope for major companies going bankrupt, for
the credit crisis continuing. The Fed is cutting rates rapidly
but that doesn't seem to be reviving the economy. So people are
fleeing into hard assets, away from paper assets like money."
Gold has gained nearly 20 percent in 2008, driven by buying
from investors and speculators on expectations of further
interest rate cuts in the United States and record high oil
prices, which raised its appeal as a hedge against inflation.
Oil slipped below $110 a barrel as investors took profits
after prices hit a record $111 in the previous session, but the
depressed dollar was seen limiting losses.
"Trading would continue to be dominated by renewed fears
about the perils of a collapse in the value of the dollar and
the ever-dimmer prospects for growth in the world's largest
economy," said Pradeep Unni, analyst at Vision Commodities.
"Until these two fears persists and speculative demand
continues to be well rewarded till date, fresh funds would
always creep in, propelling the metal further north."
WEAK DOLLAR SUPPORTS
The dollar hovered near record lows against the euro and
investors braced for more losses as worries over the U.S.
economy and the financial sector dominated sentiment.
Dollar woes deepened on Thursday after data showing a
surprise drop in U.S. retail sales for February, building
concern that the economy had slid into a recession.
A weaker dollar makes gold cheaper for holders of other
currencies and often lifts bullion demand.
The latest strains in financial markets and signs of a
shrinking economy have investors bracing for hefty rate cuts
this year. Investors see a 90 percent chance of another 75 basis
point rate cut to 2.25 percent at the Fed's meeting next week.
Rate cuts tend to squeeze the dollar, as investors look for
alternative assets with better returns.
"All eyes are on data, particularly on the U.S. CPI. If that
shows further signs of rising inflation, we will definitely see
gold prices rising above the $1,000 level," said James Moore,
analyst at TheBullionDesk.com.
U.S. consumer price inflation figures, due at 1230 GMT, are
seen remaining uncomfortably high in February.
Gold hit $850 an ounce in January 1980 as high inflation
linked to strong oil prices, plus the Soviet intervention in
Afghanistan and the impact of the Iranian revolution, prompted
investors to buy the metal.
After adjusting for inflation, the 1980 high is equivalent
to $2,119.30 an ounce at 2007 prices, according to precious
metals consultancy GFMS Ltd.
In the physical sector, dealers saw sales of scrap as
jewellers cashed in on gold's rise.
Platinum <XPT=> rose to $2,100/2,110 from $2,098/2,108 an
ounce, but palladium <XPD=> fell $1 to $507/511. Silver <XAG=>
was up at $20.65/20.70 an ounce from $20.42/20.47 in New York.
(Editing by Chris Johnson)
