(Updates with quotes, closing prices, market activity)
By Atul Prakash
LONDON, Feb 28 (Reuters) - Gold raced to a record high at
$969 an ounce on Thursday as the dollar's slump to record lows
and strong oil prices boosted investor buying.
Silver hit a 27-year peak above $19.75 an ounce, palladium
hit a 6-1/2 year high and platinum bounced back after falling
more than 2 percent to a one-week low.
Spot gold <XAU=> rose as high as $969 an ounce and was at
$968.90/969.70 at 2:15 p.m. EST (1915 GMT), sharply higher than
$957.50/958.30 late in New York on Wednesday.
"It's clearly the oil, clearly the weaker dollar, and
people just want to have hard assets. I think people are very
concerned. The economic news coming out of the United States is
just bad," said Bruce Dunn, vice president of trading at
Auramet Trading in Fort Lee, New Jersey.
The dollar fell to a record low versus the euro as weak
U.S. economic data fueled recession fears and raised
expectations the Federal Reserve will cut interest rates
again.
Returns on U.S. holdings are eroding for foreign investors
and many see precious metals as hard assets that can protect
portfolios.
"Gold is pretty much tracking the euro/dollar moves and
funds and investors will keep buying the metal until it gets to
$1,000 an ounce," said David Thurtell, analyst at BNP Paribas.
"Markets for equities, property and corporate bonds are
very poor. Cash will earn you less and less in interest.
Investing in gold is an obvious choice when other asset classes
are not doing that well," he said.
Oil traded as high as $102.97 a barrel, a record, boosting
gold's appeal as a hedge against inflation. U.S. crude futures
<CLc1> settled up $2.95 at $102.59 a barrel.
The U.S. active April gold contract <GCJ8> settled up $6.50
at $967.50. In Thursday's afternoon electronic trade, gold
futures reached a record high of $975 an ounce.
"Gold should remain pretty well supported. If the dollar
weakens further, then definitely we will see an acceleration in
the upside trend. We see a range between $950 and $1,000," said
Frederic Panizzutti, precious metals analyst at MKS Finance.
Gold has gained around 16 percent this year on investor
demand driven by record high oil prices and the possibility of
more interest rate cuts, which has raised the metal's appeal as
an alternative investment.
PHYSICAL MARKET
In the physical sector, selling from retail investors in
Japan slowed down on expectations there was room for gold to
rise further, while dealers in Singapore noted light selling
from jewellers in Indonesia and Thailand.
Gold bars were offered at a discount of 25 U.S. cents an
ounce to the spot London prices in Tokyo.
In other metals, platinum <XPT=> was last at $2,135/2,140
an ounce after falling as low as $2,084, slightly lower than
$2,130/2,140 late in New York on Wednesday. It hit a record of
$2,192 on Feb. 22 as persistent power supply problems disrupted
mining in South Africa, the world's top producer.
"We continue to believe that prices will trend higher into
the second quarter, but should soften in the second half of
this year," Standard Chartered Bank said in a report.
"Some of the short-term problems in South Africa should be
overcome by then, and consumption is likely to be dented by
higher prices in some sectors such as jewellery. Despite this,
platinum is expected to remain fundamentally tight and prices
should trend higher once more heading into 2009."
In market news, Zurich Cantonal Bank said its palladium
exchange traded fund attracted much more money than expected,
and its platinum fund was catching up as investors bet on even
higher prices. []
Silver <XAG=> rose as high as $19.83 an ounce and was last
at $19.79/19.84, versus its Wednesday finish of $19.22/19.27.
Palladium <XPD=> hit a high of $560/564 an ounce, up from its
previous U.S. market close of $550/555.
(Additional reporting by Frank Tang in New York and Lewa
Pardomuan in Singapore)
