(Updates with prices, detail)
By Atul Prakash and Anna Ringstrom
LONDON, March 14 (Reuters) - Gold raced to an historic peak
above $1,000 on Friday as the dollar's plunge to record lows on
weak data and deepening financial market troubles in the United
States boosted bullion's safe-haven appeal.
Shares of investment bank Bear Stearns <BSC.N> fell 50
percent on news the bank's liquidity position had deteriorated
significantly, prompting it to secure financing from JPMorgan
Chase and the Federal Reserve Bank of New York. []
"This whole fear of the credit crisis being far from over
seems to escalate on a daily basis," Daniel Hynes, metals
analyst at Merrill Lynch, said.
"That has been a key driver of gold over the last couple of
months. So this announcement just adds fuel to that fire."
Gold, seen as a safe-haven asset during financial and
political troubles, surged as high as $1,007.10 an ounce. It
<XAU=> was quoted at $999.60/1,000.40 at 1611 GMT, compared with
$991.00/991.80 late in New York on Thursday.
The metal has gained more than 20 percent this year on top
of a 32 percent gain in 2007.
U.S. gold futures set a record high of $1,009 an ounce, with
the most active contract for April delivery <GCJ8> last quoted
at $1,000.80, up $7.00 an ounce.
The metal's rally gathered pace on the declining dollar,
which hit a record low against the euro after Bear Stearns said
a worsening cash position had forced the Wall Street firm to
secure emergency financing.
News that the New York Federal Reserve and J.P. Morgan Chase
will provide funds for the fifth-largest U.S. investment bank
signalled more credit turmoil to come and added to investor
fears that the economy is in for a long recession.
Earlier, a report showing underlying U.S. inflation was
unchanged in February also boosted the case for more intersect
rate cuts from the Federal Reserve, which has cut rates from
5.25 percent to 3 percent since September.
A rate cut tends to weaken the dollar as investors look for
alternative assets for better returns. A weaker dollar, in turn,
makes gold cheaper for holders of other currencies and often
lifts bullion demand.
FINANCIAL MARKET TROUBLES
"It made a breakout really on the news about Bear Sterns,"
Dan Smith, analyst at Standard Chartered Bank, said referring to
the metal's rise above $1,000 an ounce.
"Gold is in a long-run uptrend. It's tending to ignore bad
news and rally on the good news at the moment. We're looking
forward to the next Fed meeting to see how interest rates might
get cut," Smith said.
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.
"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 was also firm in other currencies, which is often seen
as a bullish sign. The metal quoted in euros <XAUEUR=R> was at
639.83 euros an ounce, just below this month's record high of
649.85 euros. It was last at 492.32 sterling <XAUGBP=R>, versus
a record high of 497.55 sterling on March 3.
"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."
Platinum <XPT=> fell to $2,070/2,080 from $2,098/2,108 an
ounce, while palladium <XPD=> rose $1 to $509/514. Silver <XAG=>
was up at $20.65/20.70 an ounce from $20.42/20.47 in New York.
(Additional reporting by Anna Stablum in London)
(Editing by Peter Blackburn, David Evans)
