Gold hits record on dollar slump, targets $1,000

By Atul Prakash

LONDON (Reuters) - Gold rose to all-time high on Thursday as investor buying speeded up after the dollar sank and oil hovered near lifetime peaks.

Gold rose to $992.70 an ounce before easing to trade at $991.60/992.40 at 7:08 a.m. EDT, against $981.90/982.70 late in New York on Wednesday.

"Right now the dollar is the main driving factor behind the move, but the gold price has risen surprisingly little given the dollar weakness," said Walter De Wet, analyst at Standard Bank.

Increased supply of scrap gold and a sharp drop in physical demand because of high prices were putting a cap on the price rally, he said.

"If the dollar stays at this level, we might see $1,000 very soon, but if it retraces, it's going to become difficult."

The dollar hit fresh depths, hammered to a 12-year low versus the yen and record troughs against the euro on mounting worry about the health of the U.S. economy and financial sector.

The dollar's slide came despite remarks from U.S. President George W. Bush on Wednesday that he would like to see a stronger dollar and expressed concern its falling value was one cause of soaring U.S. energy prices.

Market expectations for aggressive Fed rate cuts next week have also continued to hamper the dollar.