(Recasts with quotes, prices, changes dateline, pvs TOKYO)
By Anna Ringstrom
LONDON, March 17 (Reuters) - Gold prices shot up to record
highs on Monday as investors fled to safe haven assets on the
back of deepening worries about the U.S. financial sector and
new lows for the dollar.
Spot gold <XAU=> traded at $1,023.95/1,025.00 an ounce at
1137 GMT after hitting a high of $1,030.80. On Friday, it closed
at $996.90/997.70 in New York.
"The current macro-economic backdrop, particularly in the
United States, is bringing new buyers into the gold market. The
downward pressure on the dollar and general uncertainty are
supporting the market," said Michael Widmer, analyst at Lehman
Brothers.
"What is really important for this week is to see what the
Fed is doing," he said.
The U.S. Federal Reserve unexpectedly cut its discount rate
on Sunday and opened up discount window lending to major
investment banks -- a tool not used since the Great Depression
-- in a sign of its deep concern over the current crisis.
Investors also expect the Fed could slash overnight rates by
up to 125 basis points by the end of its meeting on Tuesday.
JPMorgan Chase & Co <JPM.N> said on Sunday it would buy
stricken rival Bear Stearns <BSC.N> for just $2 a share in a
deal that values the U.S. investment bank at about $236 million.
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But these measures didn't restore investors' confidence.
Instead, the dollar tumbled to a record low against the euro
<EUR=> on worries there would be more casualties in the widening
U.S. financial crisis.
A weaker dollar makes gold cheaper for holders of other
currencies and often lifts bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
The financial jitters propelled oil to a record high.
DOLLAR IN FOCUS
James Moore, analyst at TheBulliondesk.com, said the dollar
could come under further pressure depending on the outcome of
U.S. macroeconomic data later in the day and the Fed's rate
decision on Tuesday.
"However given the likelihood of further rate cuts at this
week's FOMC meeting, we remain bullish towards gold and
anticipate the metal could test as high as $1,150 this quarter
as investors seek to offset rising safe-haven/inflationary
concerns," Moore said in a research note.
"As long as financial markets are driven by angst and panic,
gold is likely to remain firm," he said.
Gold's attraction as an alternative investment has helped
boost price by over 23 percent this year alone. It gained 32
percent in 2007.
Gold hit $850 an ounce in 1980, lifted by a combination of
high inflation linked to strong oil prices, the Soviet invasion
of 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. The average for the whole
of 1980 has been calculated at $1,532.14, according to precious
metals consultancy GFMS Ltd.
In other metals, silver <XAG=> set a new 27-year high at
$21.24 and was last traded at $20.99/21.04 an ounce, up from
$20.63/20.68 in New York.
Platinum <XPT=> fell to $2,005/2,025 from $2,070/2,080 an
ounce in New York. Palladium <XPD=> declined to $488/493 an
ounce from $509/514.
(Editing by Chris Johnson)
