(Recasts, updates with closing prices, market activity,
changes dateline to NEW YORK, pvs LONDON)
By Frank Tang
NEW YORK, Jan 11 (Reuters) - Spot gold surged to a record
just shy of $900 an ounce on Friday as investors poured into
the market, driven by uncertainties in financial markets and
inflation fears amid signals that aggressive U.S. interest rate
cuts may be on the cards.
The value of gold as a safe-haven investment was boosted by
worries of further write-downs among major financial
institutions and credit market meltdown in the United States,
the world's biggest economy.
The run higher in gold spurred on other precious metals,
with platinum hitting a record high and silver surging to
27-year peaks.
Spot gold <XAU=> hit a record $898.00 an ounce, but later
trimmed gains to $896.40/897.10 in New York at 2:15 p.m. EST
(1915 GMT), compared with $889.90/890.60 quoted in New York
late on Thursday.
The most-active U.S. February contract <GCG8> briefly
breached $900 an ounce, hitting a record $900.10 per ounce. It
settled up $4.10 at $897.70 an ounce.
"Clearly, there are some concerns about the financial
system. And, I think, in that environment, there are some asset
diversification and asset shift into gold," said Caesar Bryan,
portfolio manager of GAMCO Gold Fund in New York.
"It's just a lot of uncertainty, not just in the subprime
mortgage areas, but in other areas as well. As long as the
uncertainty prevails, I think gold is an interesting
investment," said Bryan, who oversees more than $550 million of
assets under his fund.
U.S. stocks fell sharply on Friday in late afternoon trade,
with the benchmark blue-chip Dow Jones industrial average
<> down about 250 points, or 1.8 percent, at 12,600.
"Basically, this is very much a continuation of the pattern
that we've been seeing, which is flight-to-quality demand.
Another 250-point drop in the stock market is certainly
contributing to gold's strength," said Bill O'Neill, a partner
in LOGIC Advisors in Upper Saddle River, New Jersey.
INFLATION WORRIES
On Friday, sharply higher corn, wheat and soy prices, after
bullish U.S. agricultural acreage data, also lifted gold, which
is used by investors as a hedge against inflation.
"Very bullish grain report this morning certainly contained
inflationary implications, and I think it's supportive as
well," O'Neill said.
Dealers and analysts said that, while the speed of
bullion's current rally had raised the stakes for a corrective
sell-off, bullish sentiment was solid.
"There are a number of drivers that support safe-haven
buying and continued investment demand. That ranges from
geo-political tensions and expectations for higher inflation to
broader macro-economic concerns," said Suki Cooper, metals
analyst at Barclays Capital.
The dollar remained on the defensive against the euro after
U.S. Federal Reserve Chairman Ben Bernanke said on Thursday
that the central bank was ready to take "substantial" measures
to shore up a slowing economy.
The Fed has already cut rates a full percentage point since
September. Lower interest rates dent the dollar's yield appeal
-- raising gold's profile as an alternative investment.
In the physical sector, fears of further rises ignited
buying from jewellers in Indonesia and Thailand, but retail
investors in other parts of Asia, especially Japan, cashed in
on their holdings to take advantage of sky-high prices.
The key gold futures contract for December 2008 delivery
<0#JAU:> on the Tokyo Commodity Exchange hit an intraday high
of 3,182 yen per gram, its best level since March 1984. It
ended 51 yen higher at 3,168 yen.
Platinum <XPT=> hit a record $1,564 per ounce and was at
$1,562/1,566 an ounce, up from $1,550/1,555 late in New York on
Thursday.
Silver <XAG=> rallied to a 27-year high of $16.29 an ounce,
before dipping to $16.21/16.26 an ounce, up from its previous
finish of $16.12/16.17.
Palladium <XPD=> lagged the other precious metals, but was
still firm, trading at $375/379 an ounce, down from its
Thursday's close of $373/376.
For factboxes on how to invest in gold, major price drivers
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(Additional reporting by Atul Prakash and Veronica Brown in
London, Chris Kelly in New York and Lewa Pardomuan in
Singapore)
