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Gold jumps 2 percent to fresh record highs

17/03/2008 - 2:31

TOKYO (Reuters) - Gold prices jumped more than 2 percent on Monday to hit new all-time highs as the dollar tumbled and news of the acquisition of Bear Stearns highlighted the depths of the U.S. financial market's problems.

JPMorgan Chase acquired Bear on Sunday after having provided emergency funding to the company on Friday via the Federal Reserve.

The Fed cut its discount rate on Sunday and launched a new discount window facility for primary dealers.

Spot gold rose to a high of $1,021.40 per ounce on Monday, up more than 2 percent from Friday when it hit a record high of $1,007.10.

It was at $996.90/997.70 late on Friday in New York.

The most active gold contract for April delivery on the Comex division of the New York Mercantile Exchange rose to $1,023.8 per ounce, after closing at $999.50 in New York, up $5.70. It marked a record high of $1,009 on Friday.

The dollar sank to a record low against the euro on Monday as investors said the acquisition of Bear by JPMorgan showed the seriousness of the problems faced by U.S. financial markets.

"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.

"The market is completely bearish on the dollar. The market is also very pessimistic about the dollar's outlook."

Lower interest rates typically weigh on the dollar and add luster to gold, which is often seen as an alternative to holding the U.S. currency.

The key February 2009 gold contract on the Tokyo Commodity Exchange <0#JAU:> fell 11 yen, or 0.3 percent, to 3,227 yen per gram at 8:51 p.m. EDT.

Platinum inched up to $2,085/2,095 an ounce, compared with $2,070/2,080 in late New York on Friday.

Palladium inched down to $507.00/512.0 an ounce compared with $509/514.

Silver inched up to $20.97/21.02 an ounce from $20.64/20.69 late in New York.

(Reporting by Miho Yoshikawa and Chikafumi Hodo)


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