LONDON (Reuters) - Gold swept to a record high on Wednesday above the key $850-an-ounce mark, driven by surging oil, a weaker dollar and simmering geopolitical tensions that polished its safe-haven credentials. Other metals jumped on bullion's bandwagon with platinum scoring a record high, silver at its highest since mid November and palladium at two-month highs.
LONDON (Reuters) - Gold swept to a record high on Wednesday above the key $850-an-ounce mark, driven by surging oil, a weaker dollar and simmering geopolitical tensions that polished its safe-haven credentials.
Other metals jumped on bullion's bandwagon with platinum scoring a record high, silver at its highest since mid November and palladium at two-month highs.
Spot gold surged to a record $859.30 an ounce -- surpassing the $850 fixing high seen in January 1980.
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It later backtracked slightly to $857.85/858.55 by 11:53 a.m. EST, compared with $832.70/833.50 quoted late in New York on Monday.
"It's not surprising given that gold's a safe-haven asset. It's reflective of the fact there is risk aversion in the market in the new year," said Phylis Papadavid, strategist at Socgen.
"Right now the market is wanting more clarity on the U.S. economy," she added.
The euro extended gains against the dollar on Wednesday after a gauge of the U.S. manufacturing sector last month dropped to its lowest since April 2003, increasing expectations for more Federal Reserve rate cuts and proving a final catalyst for gold's latest pulse higher.
A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.
Gold gained more than 30 percent in 2007, in its biggest annual gain since 1979. The metal's allure as an investment gathered momentum as the dollar tumbled to successive record lows and financial markets reeled from a global credit crunch.
Bullion has also benefited from a vogue for commodities in recent years, fuelled by booming emerging market growth fostered mainly by China's industrial revolution.
Geopolitical tension -- most recently highlighted by the assassination of Pakistan opposition leader Benazir Bhutto -- also proved a boon for safe-haven buying.
Oil soared rising above $99 a barrel, as renewed violence in oil exporter Nigeria and expectations of further declines in U.S. crude stocks revived worries of tightening supplies.
POISED FOR MORE GAINS?
"$850 is really just a number...The significance of it is more a confirmation of the ongoing trend. So, it remains a bullish sign for the new year," said Greg Orrell, portfolio manager at OCM gold fund.
In other bullion markets, the Tokyo gold futures market was closed for a holiday, while the most-active U.S. February COMEX gold contract hit a contract high.
In other precious metals, silver rose to $15.16/15.21 an ounce from $14.77/14.82 late in New York.
The market noted large inflows into an exchange-traded funds based on physical silver. The metal held by iShares Silver Trust <SLV.A> jumped by more than 600 tonnes to a record 5,246 tonnes on Dec 31 from the previous trading day.
The fund has so far accumulated about a fourth of annual mine production.
"At some point, this rising volume of silver in the ETF will eventually filter through to higher silver lease rates and that should lead to even higher prices," said David Holmes, director of precious metals sales at Dresdner Kleinwort.
Platinum rose to $1,542/1,546 from $1,520/1,525 -- having hit a record high of $1,544 earlier -- while palladium rose to $373/378 an ounce.
(Additional reporting by Jamie McGeever in London and Frank Tang in New York)
(Editing by Michael Roddy)
