Gold heads for largest yearly rise in 30 years

By Atul Prakash

LONDON (Reuters) - Gold was on track for its biggest yearly gain since 1979, with prices hovering on Monday about $15 an ounce away from its historic highs.

It has jumped more than 30 percent this year as a slide in the dollar, record high oil prices, credit market turmoil, falling U.S. interest rates and geopolitical tension helped to increase its safe-haven appeal.

"For gold, this marks the sixth consecutive year of positive returns and consequently represents the longest gold price rally in history," Deutsche Bank said.

In the past days, the metal gained on speculative buying driven by dollar weakness and tensions in Pakistan following the assassination of opposition leader Benazir Bhutto.

"Certainly we are looking for a test of $850 very early in 2008. All the supportive factors are still there. The dollar is very much under pressure and we have got geopolitical tensions," said James Moore, precious metals analyst at TheBullionDesk.com.

"There is going to be some reallocation of money next year and certainly gold is going to get a favor, as a market to move 30 percent in one direction is going to raise attention."

Spot gold hit a 7-week high of $843.20 an ounce before falling to $835.50/836.30 by 1542 GMT, compared with $837.80/838.50 in New York late on Friday.

Gold was fixed at a record high of $850 in January 1980 on high inflation linked to strong oil, Soviet intervention in Afghanistan and the effects of the Iranian revolution.