U.S. gold surges to record on Bear Stearns, dollar

U.S. gold futures rose 1 percent to a record high on Friday, trading firmly above the

$1,000 an ounce, lifted by a record low dollar and as investors

fled to bullion as a safe haven due to a worsening financial

market crisis.

Bear Stearns Chief Executive Alan Schwartz said that the

U.S. investment bank's liquidity position in the last 24 hours

had significantly deteriorated, and that JPMorgan Chase and the

Federal Reserve Bank of New York agreed to provide secured

funding to Bear as necessary. [ID:ID:nN14389680\]

"It is indicative of how serious the financial crisis is,

and the impact that it has on financial firms in the whole

financial arena," said Bill O'Neill, managing partner of LOGIC

Advisors in Upper Saddle River in New Jersey.

"This is not a positive thing in my view. This is indicative

of the kind of crisis that we are in. I do view this as bullish

for hard assets," O'Neill said.

At 10:33 a.m. EDT (1433 GMT), the active gold contract for

April delivery GCJ8 on the COMEX division of the New York

Mercantile Exchange jumped $10.40 or 1.1 percent to $1,004.30 an

ounce. It traded between a bottom of $991.70 overnight and a

record high of $1,007.30.

Investors often turn to gold as insurance in times of

financial market jitters and economic uncertainties.

U.S. stocks had dropped as much as 2 percent, while Bear

Stearns stock had nosedived as much as 50 percent. The U.S.

stock market trimmed losses and was down about 1 percent.

The dollar fell to a fresh 12-1/2-year low against the yen

and a record low against the euro on the Bear Stearns liquidity

news, increasing fear of a deep U.S. recession.

Returns on U.S. holdings are eroding for foreign investors

and many see precious metals as hard assets that can protect

portfolios.

Spot gold firmly breached the historic $1,000 level

on Friday, after U.S. gold contracts burst through the

psychological barrier on Thursday due to a struggling dollar

and inflation fears.

Spot gold was quoted at $1,001.55/1,002.25, up from

$991.00/991.80 at the close Thursday. London bullion dealers

fixed the morning spot price at $997.00 an ounce.

George Gero, vice president of RBC Capital Markets Global

Futures in New York, said that investors continued to favor

hard assets as gold was trading at all-time highs.

"Thousand-dollar gold may have legs now with media attention

bringing new investors to the market, while palladium and silver

are catching up as well," Gero said.

Gold is up 20 percent this year. In January it surpassed

the historic milestone from January 1980. That year, bullion

peaked at $850 an ounce against a backdrop of high inflation

linked to strong oil prices, the Soviet intervention in

Afghanistan and the Iranian revolution.

http://www.reuters.com/article/oilRpt/idUSN1439998920080314