(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to byline)
By Frank Tang and Atul Prakash
NEW YORK/LONDON Feb 27 Gold surged to a record
high on Wednesday, nearing $1,000 an ounce as investors were
spurred by a plummeting dollar, oil's initial rally and
speculation there will be further U.S. rate cuts.
Gold bullishness was reaffirmed by weak U.S. economic data
and Federal Reserve Chairman Ben Bernanke's reassurance that
the central bank was ready to cut interest rates again to
prevent the distressed housing and credit markets from further
damaging a weak economy.
Silver also rallied to its loftiest level since November
1980, palladium jumped to a 6-1/2 year high and platinum
advanced to trade near last week's record highs before paring
Spot gold XAU= rose as high as $964.70 an ounce and was
at $957.50/958.30 by New York's last quote at 2:15 p.m. EST
(1915 GMT), against $946.60/947.40 in New York late on Tuesday.
It has gained 16 percent this year.
The benchmark U.S. April gold contract at the COMEX
division of the New York Mercantile Exchange GCJ8 settled
$12.10, or 1.3 percent, higher at $961.00.
"The main driver is the record low U.S. dollar, but apart
from that gold should remain fairly well supported even if the
currency retracts," said Walter De Wet, precious metals analyst
at Standard Bank.
"There are not many alternatives out there right now.
Equities are currently high risk investments and still have
negative returns for the year. U.S. Treasury is a traditional
safe-haven, but there is also not a lot of value.
The dollar fell to its lowest-ever price against a basket
of currencies and traded below $1.50 per euro for the first
time on Wednesday. Returns on U.S. holdings are eroding for
foreign investors and many see precious metals as hard assets
that can protect portfolios.
"People are realizing that the European Central Bank does
not intend to cut rates any time soon, even while the U.S. is
slashing rates. And that's just the environment that is
tailor-made for the increases in the euro. That's going to be
positive for gold," said Patrick Fearon, precious metals
analyst with A.G. Edwards in St. Louis.
Gold held its gains in spite of a sharp turnaround in crude
oil, which initially set a record above $102 a barrel on
Wednesday. U.S. crude futures settled down $1.24 at $99.64 a
barrel due to rising inventories.
Gold is used as a hedge against inflation. Still, while oil
is basically at a record price in real terms, as well as
current prices, gold is far from a real inflation-adjusted
record, which analyst GFMS has put it as high as $2,079 an
"Investor interest in commodities as a whole remains very
strong. There is a lot of talk from pension funds about pumping
more money into commodities," said Dan Smith, metals analyst at
Standard Chartered Bank
"I can't see prices pulling back to a massive extent, even
though physical gold demand appears to be softer."
The Reuters-Jefferies CRB Index .CRB, which tracks prices
of 19 commodity futures, hit a record high. The index has
gained almost 8 percent since Feb. 13, powered by a run-up in
key commodities such as oil, gold and wheat. [ID:nN27430679]
Investment into exchange-traded funds continued. The latest
data showed gold held by New York-listed StreetTRACKS Gold
Shares (GLD.P)XAUEXT-NYS-TT, the world's largest gold-backed
ETF, hit a record high of 639.44 tonnes -- a jump of more than
30 percent in the past 12 months.
In industry news, South Africa's Harmony Gold (HARJ.J) said
two workers had been killed in an earth tremor at its
Elandsrand mine, and that production had been stopped at the
section where the incident took place. [ID:nWEB6704]
Silver XAG= jumped to $19.45 an ounce before falling to
$19.23/19.28, against $18.65/18.70 late in New York. Platinum
XPT= rose to $2,166 an ounce before ending flat at
$2,130/2,140, the same as its Tuesday New York finish.
Palladium XPD= was at $550/555 after rising to $557 an ounce,
against $523/528 late in the U.S. market on Tuesday.
(Additional reporting by Alden Bentley in New York)