(Adds quotes, updates price to TOCOM close)
By Miho Yoshikawa
TOKYO, March 17 (Reuters) - Gold prices shot up more than 3
percent to fresh record highs as investors stepped up buying of
the yellow metal, whose lustre has increased due to the dollar's
weakness and deepening U.S. financial woes.
JPMorgan Chase & Co <JPM.N> said on Sunday it would acquire
stricken rival Bear Stearns <BSC.N> for just $2 a share in an
all-stock deal that values the U.S. investment bank at about $236
million. []
The news sent the dollar tumbling to a record low against the
euro <EUR=> as investors worried that there would be more
casualties in the widening U.S. financial crisis.
The Fed cut its discount rate on Sunday and opened up
discount window lending to major investment banks -- a tool not
used since the Great Depression -- in a sign of its deep concern
over the current crisis.
"This morning's moves by the Fed clearly tell how serious the
situation is in the United States. Gold is drawing a lot of
safe-haven demand as you can't buy stocks or currencies because
of this volatility," said Shuji Sugata, manager at Mitsubishi
Corp Futures and Securities Ltd.
Gold's attraction as an alternative investment has helped
boost the precious metal's price by more than 20 percent this
year alone, as it hit successive record highs along the way.
It gained 32 percent in 2007.
"Flight-to-quality buying is boosting gold as the market is
losing faith in the dollar," said Tatsuo Kageyama, analyst at
Kanetsu Asset Management in Tokyo.
Financial jitters also propelled crude oil to a record above
$111 a barrel on Monday.
As of 0800 GMT, crude for April delivery <CLc1> climbed to as
high as $111.80 a barrel.
Gold hit $850 an ounce in January 1980, lifted by a
combination of high inflation linked to strong oil prices, the
Soviet invasion of Afghanistan and the impact of the Iranian
revolution.
After adjustment for inflation, the 1980 high is equivalent
to $2,119.30 an ounce at 2007 prices, according to precious
metals consultancy GFMS Ltd.
As of 0802 GMT, spot gold <XAU=> had risen as high as
$1,030.80 per ounce, up more than 3 percent from Friday when it
hit a record $1,007.10.
It traded at $996.90/997.70 late on Friday in New York.
Some of the gains were trimmed and spot gold was trading at
$1,021.40/1,022.00.
Gold was expected to head even higher as the dollar deepened
its slide against both the euro and the yen.
"The market is completely bearish on the dollar. The market
is also very pessimistic about the dollar's outlook," Kageyama
said.
The dollar plunged 3 percent against the yen on Monday to hit
a 13-year low below 96 yen on fears that there would be other
casualties to the fast-spreading credit crisis that claimed U.S.
investment bank Bear Stearns.
The euro vaulted to a $1.5905 <EUR=> on trading platform EBS,
up 1.5 percent on the day.
"Probably gold is the only decent asset you can hold. You
simply cannot go short in gold now," Mitsubishi's Sugata said.
Some market participants, however, expressed caution on fears
that there could be central bank intervention to prop up the
dollar.
"If that happens, then gold prices will fall," said Krishna
Kumar Nathani, managing director of Indiabullion.com, a bullion
consultancy.
He also said: "There is no demand for gold in India now. If
prices consolidate at these levels, then again the gold demand
will start picking up."
India, the world's top consumer of the metal, annually
imports between 700-800 tonnes of gold.
The most active gold contract for April delivery <GCJ8> on
the COMEX division of the New York Mercantile Exchange rose as
high as $1,033.90 per ounce, up more than 3 percent from its New
York close of $999.50, when it climbed $5.70. It later trimmed
gains and inched down to $1,022.30.
Gold futures had marked a then record high of $1,009 on
Friday.
The yen's strength against the dollar, however, weighed on
precious metals prices on the Tokyo Commodity Exchange.
The key February 2009 gold contract on the Tokyo Commodity
Exchange <0#JAU:> finished down 10 yen per gram, or 0.3
percent, at 3,228 yen, after trading between 3,200 yen and 3,248
yen.
Platinum <XPT=> inched down to $2,055/2,065 an ounce,
compared with $2,070/2,080 in New York late on Friday.
Palladium <XPD=> also fell to $504/510 an ounce compared with
$509/514.
Silver <XAG=> climbed to $21.14/21.19 an ounce from
$20.64/20.69 in New York trading.
(Additional reporting by Chikafumi Hodo, Biman Mukherji in New
Delhi; editing by Gary Crosse)
