(Recasts, adds quotes after U.S. gold futures hit $1,000/oz)
By Atul Prakash
LONDON, March 13 (Reuters) - U.S. gold futures hit a record
of $1,000 an ounce on Thursday and spot metal set historic highs
as a dollar slump forced investors to look for alternative
assets.
Record high oil prices also lifted gold's appeal as a hedge
against inflation.
Spot gold <XAU=> rose as high as $997.50 an ounce and was
last at $994.90/995.70 at 1320 GMT, against $981.90/982.70 late
in New York on Wednesday. U.S. futures <GCJ8> were last traded
at $996.90 an ounce.
"It is obviously a dollar move," said Michael Lewis, global
head of commodities research at Deutsche Bank.
"I think there is more upside for gold and generally the
precious metal complex because the Fed is going to be delivering
a very negative real interest rate environment and that is great
for gold," he said.
The dollar fell below the psychologically key 100 yen mark
for the first time in over a decade, as well as plumbing fresh
record lows versus the euro, the Swiss francs and a basket of
major currencies.
Investors remained on edge about the ailing U.S. economy and
the likely extent of future interest rate cuts as the Federal
Reserve battles to stave off a recession.
"The rise in gold is reflecting several factors, including
the general uncertainty regarding the economy, particularly with
inflation pressures in the system," said Philip Shaw, chief
economist at Investec.
"The likelihood is that if the dollar continues on its
downward trajectory that would put further upward pressure on
dollar-based commodities."
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.
Oil rose to a fresh record high, hitting new peaks for the
seventh trading day, as a weak dollar overshadowed an increase
in U.S. crude inventories.
PRICE RALLY
Gold has jumped about 20 percent this year on top of a 32
percent rise in 2007, mainly on inflation worries following firm
oil prices and chances of more rate cuts in the United States,
which elevates gold's appeal as an alternative investment.
But some analysts advised caution.
"At the moment, the environment looks inflationary, but we
think the recession in the U.S. could be deeper and longer than
thought and spread to other parts of the world," said Nadja
Reznikova, metals analyst at Wermuth Asset Management.
"We think that the environment will (later) turn more
deflationary and this will not be good for gold. The dollar is
now undervalued according to purchasing power parity and we
don't see gold going further."
Jewellers were on the sidelines, but dealers in Japan saw
purchases from the electronics sector. Gold-plated connectors
are an integral part of plugs and sockets, and the metal is also
used in wiring to connect parts of semiconductors.
In industry news, No. 2 gold producer Newmont Mining Corp
said global gold mine output will decline over the next decade
or so because of production constraints and past underinvestment
in finding new resources.
Official data showed that South African gold output fell
16.5 percent in volume terms in January compared with the same
month the previous year.
In other metals, platinum rose to a high of $2,117 an ounce
before falling to $2,091/2,101, against $2,060/2,070 in New York
on Wednesday.
Silver <XAG=> rose to $20.55/20.60 from $20.04/20.09 an
ounce, while palladium gained to $506/511 an ounce, versus
$496/501 in the U.S. market.
(Additional reporting by Anna Ringstrom, Peter Blackburn,
Anna Stablum and Pratima Desai in London)
(Editing by Chris Johnson)
