U.S. gold, silver race toward highs on oil, dollar

NEW YORK, Feb 28 (Reuters) - New York gold futures finished
higher after setting a record peak Thursday on the back of
rising crude oil prices and a lower dollar, nearing the
historic $1,000 an ounce level.

Weakness of the U.S. economy and possible rate cuts by the
Federal Reserve should continue to fan investor buying of gold,
dealers said.

Silver also ended sharply higher after racing toward the
$20 level, boosted by strong investment and industrial demand.

"It's clearly the oil, clearly the weaker dollar, and
people just want to have hard assets. I think people are very
concerned. The economic news coming out of the United States is
just bad," said Bruce Dunn, vice president of trading at
Auramet Trading in Fort Lee, New Jersey.

The benchmark April gold contract at the COMEX division of
the New York Mercantile Exchange GCJ8 settled up $6.50 at
$967.50, trading between $955.50 and $974.80, an all-time
high.

The dollar fell to a record low versus the euro EUR= as
weak U.S. economic data fueled recession fears and raised
expectations that Federal Reserve Chairman Ben Bernanke will
cut interest rates again.

Returns on U.S. holdings are eroding for foreign investors
and many see precious metals as hard assets that can protect
portfolios.

"Current prices reflect that hard asset allocations are
increasing in general, and that extended to all major
commodities," said George Gero, vice president of RBC Capital
Markets Global Futures.

Gero said that the news that the International Monetary
Fund (IMF) had no timetable yet for selling part of its gold
reserves also helped bullion.

The IMF said on Thursday no timetable has been set for the
sale of a limited portion -- about 12.9 million ounces (403.3
tonnes) -- of the IMF's gold stocks of 103.4 million ounces.

In investment news, Deutsche Bank said it will launch three
exchange-traded notes offering short, long and leveraged
trading strategies in gold, underscoring growing investment
interest as bullion races to record highs. [ID:nN27483880]

At 2:15 p.m., spot gold XAU= in New York was quoted at
$968.90/969.70, up from $957.50/958.30 at the close on
Wednesday. London bullion dealers fixed the afternoon spot
price at $959.75.

COMEX estimated final gold futures volume at 123,970
contracts and gold options at 9,643 lots. Total turnover in
Chicago Board of Trade electronic 100-oz gold futures was
19,232 lots at 2:22 p.m. EST (1922 GMT).
www.cbot.com/cbot/pub/page

SILVER JUST BELOW $20 AN OUNCE

Silver traded just a hair below $20 an ounce on Thursday.
Silver, which is also used as an industrial metal, should
receive a boost from the stimulative monetary and fiscal
policies by the Fed to boost an ailing economy, analysts said.

The last time silver traded at these prices was in November
1980, when the bubble created by the Hunt Brothers of Texas
cornering the silver market in the 1970s was deflating.

COMEX May silver SIK8 closed up 42.30 cents, or 2.2
percent, to $19.756 an ounce, trading from $19.165 to $19.965,
which marked a contract peak.

Spot silver XAG= fetched $19.74/19.79, up from the close
at $19.22/27. London silver was fixed at $19.24.

In addition, the first notice day of the March silver
contract is Friday. Volatility usually increases around first
notice day as traders decide whether to roll their March
contracts to the active May futures.

NYMEX platinum was cooling from its rally to a record high
at $2,214 an ounce last week.

A power crisis in top producer South Africa has hampered
mine operations and the expectation of a huge market deficit is
expected to continue to support the white metal.

The active NYMEX platinum contract for April delivery
PLJ8 turned to close up $2.50 to $2,154.80 an ounce. Spot
platinum XPT= fetched $2,135/2,140.

The NYMEX June palladium contract PAM8 rose $29.50, or
5.3 percent, to end at $590.25 an ounce. Spot palladium XPD=
fetched $560.00/564.00.
(Reporting by Frank Tang)