Gold hits record high near $900 on safe haven bids
NEW YORK (Reuters) - Spot gold surged to a record just shy of $900 an ounce on Friday as investors poured into the market, driven by uncertainties in financial markets and inflation fears amid signals that aggressive U.S. interest rate cuts may be on the cards.
The value of gold as a safe-haven investment was boosted by worries of further write-downs among major financial institutions and credit market meltdown in the United States, the world's biggest economy.
The run higher in gold spurred on other precious metals, with platinum hitting a record high and silver surging to 27-year peaks.
Spot gold hit a record $898.00 an ounce, but later trimmed gains to $896.40/897.10 in New York at 2:15 p.m. EST, compared with $889.90/890.60 quoted in New York late on Thursday.
The most-active U.S. February contract GCG8 briefly breached $900 an ounce, hitting a record $900.10 per ounce. It settled up $4.10 at $897.70 an ounce.
"Clearly, there are some concerns about the financial system. And, I think, in that environment, there are some asset diversification and asset shift into gold," said Caesar Bryan, portfolio manager of GAMCO Gold Fund in New York.
"It's just a lot of uncertainty, not just in the subprime mortgage areas, but in other areas as well. As long as the uncertainty prevails, I think gold is an interesting investment," said Bryan, who oversees more than $550 million of assets under his fund.
U.S. stocks fell sharply on Friday in late afternoon trade, with the benchmark blue-chip Dow Jones industrial average .DJI down about 250 points, or 1.8 percent, at 12,600.
"Basically, this is very much a continuation of the pattern that we've been seeing, which is flight-to-quality demand. Another 250-point drop in the stock market is certainly contributing to gold's strength," said Bill O'Neill, a partner in LOGIC Advisors in Upper Saddle River, New Jersey.
INFLATION WORRIES
On Friday, sharply higher corn, wheat and soy prices, after bullish U.S. agricultural acreage data, also lifted gold, which is used by investors as a hedge against inflation.
"Very bullish grain report this morning certainly contained inflationary implications, and I think it's supportive as well," O'Neill said.
Dealers and analysts said that, while the speed of bullion's current rally had raised the stakes for a corrective sell-off, bullish sentiment was solid.
"There are a number of drivers that support safe-haven buying and continued investment demand. That ranges from geo-political tensions and expectations for higher inflation to broader macro-economic concerns," said Suki Cooper, metals analyst at Barclays Capital.
The dollar remained on the defensive against the euro after U.S. Federal Reserve Chairman Ben Bernanke said on Thursday that the central bank was ready to take "substantial" measures to shore up a slowing economy.
The Fed has already cut rates a full percentage point since September. Lower interest rates dent the dollar's yield appeal -- raising gold's profile as an alternative investment.
In the physical sector, fears of further rises ignited buying from jewelers in Indonesia and Thailand, but retail investors in other parts of Asia, especially Japan, cashed in on their holdings to take advantage of sky-high prices.
The key gold futures contract for December 2008 delivery on the Tokyo Commodity Exchange hit an intraday high of 3,182 yen per gram, its best level since March 1984. It ended 51 yen higher at 3,168 yen.
Platinum hit a record $1,564 per ounce and was at $1,562/1,566 an ounce, up from $1,550/1,555 late in New York on Thursday.
Silver rallied to a 27-year high of $16.29 an ounce, before dipping to $16.21/16.26 an ounce, up from its previous finish of $16.12/16.17.
Palladium lagged the other precious metals, but was still firm, trading at $375/379 an ounce, down from its Thursday's close of $373/376.
(Additional reporting by Atul Prakash and Veronica Brown in London, Chris Kelly in New York and Lewa Pardomuan in Singapore)
