UPDATE 7-Gold hits lifetime peak as dollar sinks, oil rises

(Updates with quotes, prices, adds NEW YORK to dateline)

By Frank Tang and Atul Prakash

NEW YORK/LONDON, March 5 (Reuters) - Gold set an historic high near $1,000 an ounce on Wednesday, and silver jumped to a 27-year peak, as a record low dollar and strong oil triggered a fresh wave of bullion buying.

Spot gold <XAU=> rose as high as $991.80 an ounce, after slipping to a low of $959.45. It was at $985.70/986.50 at 2:15 p.m. (1915 GMT), against $963.20/964.00 in New York late on Tuesday, when it fell 2 percent with a drop in oil.

"The dollar's role as a reserve currency is being marginalized. It's becoming more of a localized currency," and that was very supportive to dollar-denominated gold, said Greg Orrell, portfolio manager of the $165 million OCM Gold Fund in Livermore, California.

The dollar hit a fresh low against the euro and a basket of currencies on renewed concerns about the health of the U.S. economy.

"The rally is mainly dollar-driven," said Frederic Panizzutti, precious metals analyst at MKS Finance.

"We tried several times on the upside, but each time lost momentum on the back of profit-taking. Taking into consideration that some profits have already been taken, these moves are probably driven by fresh positions.

"We might be more lucky this time in reaching the key psychological level of $1,000," he said.