(Recasts, adds quotes, changes prices, pvs SINGAPORE)
By Atul Prakash
LONDON, Feb 21 (Reuters) - Gold and platinum set historic
highs in a choppy trade on Thursday, with strong oil prices, a
struggling dollar and supply worries boosting investor interest.
Silver hit a 27-year high above $18 an ounce, a spike of 22
percent this year, while palladium jumped to a 6-1/2-year high
above $500 an ounce.
"At the moment, it appears to be investor demand which is
the real driving force behind it. And that is influenced by
things such as a weak dollar, risk aversion and inflationary
fears," said Daniel Hynes, metals strategist at Merrill Lynch.
"There is a real possibility of a spike above $1,000 an
ounce, although I am not convinced at this stage about its
longevity above that price," he said referring to gold prices.
Spot gold <XAU=> hit a high of $948.60 an ounce and was
quoted at $945.20/946.00 at 1113 GMT, against $934.80/935.60
late in New York on Wednesday.
Oil prices held near $100 a barrel, close to all-time highs,
boosted by a surge of investor cash into commodities that has
banished for now concerns over a slowdown in the United States.
Gold is generally seen as a hedge against oil-led inflation.
It often moves in the opposite direction of the dollar, as a
weaker currency makes gold cheaper for other currency holders.
The dollar fell against the euro as mounting worries about a
U.S. economic slowdown lifted expectations of further monetary
easing and kept downward pressure on the currency.
In its quarterly forecast, the U.S. Federal Reserve cut its
economic growth forecast for 2008 due to a deepening housing
slump and tight credit. Analysts believe it is paving the way to
cut rates even further.
PLATINUM RECORD
A rate cut tends to weaken the dollar as investors shift to
other assets for better returns.
"There is no single reason why investors hold gold. Some
fear a dollar crash, others buy gold for a liquid way of playing
the commodity cycle, others will have bought it on momentum,"
said John Reade, metals analyst at UBS Investment Bank.
"But yesterday's move shows another reason. We believe that
many investors have bought and held gold because of fears of
stagflation, coupled perhaps with worries about financial system
risk," he said in a client note.
In other markets, U.S. gold futures also hit a record high.
The active April contract <GCJ8> rose as high as $952.4 an ounce
before falling to $950.
"Central to our thinking on gold is the convergence of four
powerful factors coming together simultaneously -- declining
mine supply, compelling external factors relating to weakening
dollar, inflationary expectations and geopolitical tension,"
said Ross Norman, managing director at TheBullionDesk.com.
Platinum <XPT=> hit a record high of $2,182 an ounce and was
last at $2,160/2,170, against $2,120/2,130 late in New York on
Wednesday, when it fell over 3.5 percent to a low of $2,065.
"Clearly any weakness in the price is pounced on quickly by
investors as there are plenty waiting on the sidelines to enter
into the market," Hynes of Merrill Lynch said.
Platinum has surged 40 percent this year after mines in
South Africa, accounting for 80 percent of world output, ground
to a halt for five days at the height of last month's power
crisis.
South African power utility Eskom said it had contracted 30
million tonnes coal of the 45 million tonnes it needs over the
next two years to help resolve a crippling power crisis.
Palladium <XPD=> hit a high of $513/518 an ounce, its
highest in more than six years, to track strong platinum prices.
The metal was last quoted at $481/484 in New York.
Silver <XAG=> hit a high of $18.02 and was last at
$18.00/18.05, against $17.76/17.81 in New York.
(Reporting by Atul Prakash; editing by Chris Johnson)
