(Updates with New York closing prices, market activity)
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.
Bear Stearns <BSC.N> shares tumbled as much as 50 percent
on news liquidity problems prompted the the investment bank 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."
Spot gold <XAU=> surged as high as $1,007.10 an ounce; it
was at $996.90/997.70 by New York's last quote at 2:15 p.m. EDT
(1815 GMT), up from $991.00/991.80 late on Thursday.
Gold, seen as a safe haven asset, 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. The
most active contract for April delivery <GCJ8> on the COMEX
division of the New York Mercantile Exchange settled up $5.70
at $999.50 an ounce.
Gold rallied as the dollar tumbled to a record low against
the euro after news of mounting problems at Bear Stearns, the
No. 5 U.S. investment bank, stoked fears of a long recession.
Earlier, a report showing underlying U.S. inflation was
unchanged in February boosted the case for more U.S. interest
rate cuts. Since September, the Federal Reserve has cut rates
from 5.25 percent to 3 percent.
A rate cut tends to weaken the dollar, making gold cheaper
for holders of other currencies.
FINANCIAL MARKET TROUBLES
"It made a breakout really on the news about Bear Sterns,"
Dan Smith, analyst at Standard Chartered Bank, said referring
to gold'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 amid high inflation
linked to strong oil prices, plus the Soviet intervention in
Afghanistan and the impact of the Iranian revolution.
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.
Gold's rally has been driven by "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 also was firm in other currencies. The metal
<XAUEUR=R> was at 639.83 euros an ounce, just below this
month's record high of 649.85 euros. It was at 492.32 sterling
<XAUGBP=R>, versus a record high 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.
Platinum <XPT=> fell to $2,070/2,080 from $2,098/2,108 an
ounce late Thursday in New York, while palladium <XPD=> rose $1
to $509/514. Silver <XAG=> was up at $20.64/20.69 an ounce from
its previous finish of $20.42/20.47 in New York.
(Additional reporting by Frank Tang in New York, Anna Stablum
in London)
