Gold near 28-year high

LONDON (Reuters) - Gold neared a 28-year peak on Monday, supported by an struggling U.S. dollar, while wheat prices rose on fears of a poor Australian crop and oil slipped from last week's record high.

Gold's traditional appeal as a safe asset to hold in times of economic uncertainty made it appealing in today's troubled markets, fund managers and analysts said.

"If there is a recession or a slowdown in growth, non-precious metals will be hit but not gold," a Paris-based fund manager said.

"When you speak about gold with institutional investors and retail investors, everybody knows what you're talking about."

Fears of higher inflation and persistent concerns about the U.S. economy and a possible further weakening of the dollar were helping gold, analysts said.

Investment bank Goldman Sachs late last week raised its three-month price forecast for the precious metal to $775 an ounce from $700 an ounce, largely based on its expectation that the dollar will weaken further.

Barclays Capital recently increased its gold price forecast, predicting $750 per ounce in the fourth quarter of 2007.

As well as a weakening dollar, "additional catalysts of expectations of slower U.S. growth momentum and further Fed rate easing have the potential to drive prices to fresh 28 year highs", Barclays said in a report.

On Monday, the dollar fell to a record low versus the euro for the third session in a row, weighed by speculation of possible further U.S. interest rate cuts.

Commodities including gold were heavily sold last month as investors scrambled for cash to cover losses sustained elsewhere in market turmoil sparked by the collapse in U.S. subprime -- or high risk -- lending, but since then have rebounded strongly.

STRONG PERFORMANCE

At Monday's intra-day high of $736.05 per ounce, -- which it touched before slipping to around $730 by 1330 GMT -- gold is up 15 percent since the start of the year, and commodities in general are some of the best-performing assets so far this year.

Aside from gold, London Metal Exchange copper is up more than 25 percent at Monday's official price of just above $8,000 per tonne, while Paris-traded wheat futures are up almost 90 percent.

Wheat for delivery in November rose more than 2 percent to 261 euros per tonne on Monday, after hitting a record of 300 euros earlier this month.

In contrast with commodities investments, major share indices such as the Dow Jones industrial average .DJI and Nasdaq Composite .IXIC are up around 10 percent.

The Reuters/Jefferies CRB Index .CRB of commodities futures hit a 12-1/2 month peak of 334.59 last Friday, up around 9 percent since the start of the year.

In wheat's case, the main reason for the price rise is a worsening outlook for the crop in major producer Australia as a result of much lower than normal levels of rainfall.

"It's a rolling disaster," said Garry Booth of commodities broker MF Global. "There are vast areas where the crop has been wiped out already. The (rest) of the crop needs rain now," he said.

Oil, a major component of most commodities indices, hit an all-time high of $83.90 per barrel for U.S. crude CLc1 last week on a mix of disruption caused by a storm in the Gulf of Mexico, expectation of more interest rate cuts, and a weaker dollar.

On Monday, it slipped to around $81 as producers in the Gulf of Mexico restored more supply.

(Additional reporting by Michael Byrnes and Sambit Mohanty)