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.

Rising energy prices increased gold's appeal as a hedge against inflation. U.S. crude futures CLc1 settled up $5 at $104.52 a barrel, after an unexpected drop in crude supplies and following OPEC's decision to keep output unchanged.

"We have to keep an eye on oil and the euro/dollar. As soon as the euro moves up above $1.50, the market sees fresh speculative buying. We have a chance to see the $1,000-an-ounce level," said Michael Kempinski, senior trader at Commerzbank.

"Gold still looks very good on charts."

The euro EUR= was quoted at $1.5264, up from $1.5208 in New York late on Tuesday.

The active U.S. gold contract for April delivery GCJ8 settled up $22.20, or 2.3 percent, at $988.50 an ounce. In early afternoon sessions, it had hit a record high of $995.20.

OTHER METALS JUMP

Gold's rally also supported silver XAG=, which rose as high as $20.82 an ounce and was at $20.68/20.73, against $19.71/19.76 late in New York on Tuesday.

Platinum XPT= fell as low as $2,150 before rising to $2,240/2,247 an ounce, against $2,220/2,230 late on Tuesday, when it hit a record of $2,290 on persistent supply fears after a power crisis disrupted mining in top producer South Africa.

Ralph D'Esposito, a floor trader in New York, said that platinum was slammed early because the white metal had run up so much and more significantly than gold.

A crippling power crisis forced a shutdown of the crucial mining sector for five days in January and since then mines have been operating with only 90 percent of their usual power.

Palladium XPD= fell to a low of $519 an ounce before jumping to $552/556, against its previous close of $545/550 in New York on Tuesday, when it rose to a 6-1/2-year high of $590. (Editing by Walter Bagley)