(Recasts, adds analyst comment, updates prices)
By Atul Prakash and Anna Ringstrom
LONDON, March 13 (Reuters) - Spot gold prices hit an
all-time peak in Europe on Thursday as a dollar slump and
inflation fears prompted investors to look for safe-haven
assets.
Spot gold <XAU=> rose as high as $999.90 an ounce before
easing slightly to trade at $992.80/993.70 at 1615 GMT, compared
with $981.90/982.70 late in New York on Wednesday.
This sparked buying of U.S. gold futures <GCJ8> which later
exceeded the psychological barrier of $1,000. Analysts said spot
prices could soon reach that level too.
"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," said Michael Lewis, global head of commodities
research at Deutsche Bank.
The dollar fell below the key 100 yen mark for the first
time in over a decade, and to fresh record lows versus the euro,
on deepening worries over the U.S. economy entering a recession.
"Gold is interesting because it also suggests that there are
inflationary pressures out there in the world economy," said
Chris Iggo, strategist at AXA Investments.
"Arguably, you're getting into bubble conditions for some of
the commodities ... I can't see it ending any time soon, that's
the problem. As long as the Fed's continuing to ease and the
dollar's weak it's going to push up commodity prices further."
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 likelihood is that if the dollar continues on its
downward trajectory that would put further upward pressure on
dollar-based commodities," Philip Shaw, chief economist at
Investec.
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."
In industry news, No. 2 gold producer Newmont Mining Corp
said global gold mine output would decline over the next decade
or so because of production constraints and past underinvestment
in finding new resources.
Official data showed South African gold output fell 16.5
percent in volume terms in January year-on-year.
In other metals, platinum rose to a high of $2,117 an ounce
before easing to $2,098/2,098.00, up against $2,060/2,070 in New
York on Wednesday.
Silver <XAG=> rose to $20.50/20.55 from $20.04/20.09 an
ounce, while palladium rose to $508/513 from $496/501.
(Additional reporting by Peter Blackburn, Anna Stablum and
Pratima Desai in London)
(Editing by Chris Johnson)
