UPDATE 3-Gold hits 28-year high as dollar struggles

(Updates with closing in Tokyo)

By Lewa Pardomuan

SINGAPORE, Sept 21 (Reuters) - Gold rose to its highest in
nearly three decades on Friday as a struggling U.S. dollar
lifted its safe-haven appeal and purchases from speculators
helped the metal defy selling pressure.

Not to be outdone, silver rose to its highest in more than
three months, platinum hit its best level since early May and
palladium touched a five-week high.

Spot gold XAU= rose as high as $739 an ounce, its
loftiest level since January 1980, on a combination of
short-covering and technical buying. It later dipped to
$737.15/737.85 an ounce, still higher than $734.20/735.00 late
in New York.

"At this point, we are seeing quite strong investor
interest in gold," said David Moore, a commodity strategist at
the Commonwealth Bank of Australia in Sydney.

"If the U.S. dollar continues to edge lower against other
currencies, then I think you will see a continued support for
gold."

Gold spiked to a life-time high of $850 in January 1980 as
high inflation linked to strong oil prices, Soviet intervention
in Afghanistan and the impact of the Iranian revolution
prompted investors to buy the precious metal heavily.

Crude oil CLc1 held near $82 a barrel on Friday after
touching a record $84 the previous day as a tropical depression
forced the shutdown of Gulf of Mexico output and triggered
supply fears ahead of peak winter fuel demand.

Gold is generally seen as a hedge against oil-led
inflation.

It hit an intraday low of $732.30 an ounce earlier on
Friday as investors booked profits on a rally that has added
more than $90 an ounce in a little over a month.

"The oil price is over $80 today. As we approach the end of
this year, the gold price will follow oil and reach $800," said
Yukuji Sonoda, precious metals analyst at Daiichi Commodities
in Tokyo.

Fundamentals looked strong, with gold miners globally
reducing their hedges, the United States cutting interest rates
and consumption in main buyer India expected to reach more than
1,000 tonnes this year, he said.

India's demand for gold reached 715.5 tonnes in 2006, the
World Gold Council said.

The most active gold futures contract for August 2008
delivery <0#JAU:> on the Tokyo Commodity Exchange hit a high of
2,747 yen per gram, its highest since August 1985, before
ending 27 yen higher at 2,746 yen.

"There's some profit taking but it looks like the Japanese
still show interest to buy. I am looking at the next target of
$750," said a bullion dealer in Hong Kong.

"I don't know whether we are going to touch that level this
month because I am sure people will take profit on higher
prices, but I would say we will eventually see $750," he said.

The most-active December gold contract GCZ7 on the COMEX
division of the New York Mercantile Exchange rose $5 to $744.9
an ounce on electronic trade, after hitting another 28-year
high at $747.1 an ounce.

The dollar hit a 31-year low against the Canadian dollar
and edged near a record low against the euro as investors
dumped the U.S. currency after the Federal Reserve surprised
markets with a half-point rate cut earlier this week.

The euro XAU= inched up to $1.4091 nearing $1.4099 hit on
Thursday -- the highest since the single European currency was
launched in 1999.

Against a basket of currencies, the U.S. currency was at
78.537, near a 15-year low of 78.450 hit on Thursday and
approaching a life-time low of 78.190.

Comments from Fed Chairman Ben Bernanke that global
financial losses stemming from disarray in the U.S. subprime
mortgage market has "far exceeded even the most pessimistic
estimates" put further pressure on the dollar.

"The market may find support $710 and I think $750 will be
the upside. There might be a final push to squeeze up the
shortists," said a dealer in Singapore.

"People are buying momentum and slowly covering back their
shorts. I guess a strong Canadian dollar is also a factor
because it's a commodity-related currency," he said.

Platinum XPT= rose to $1,338/1,343 an ounce from
$1,323.40/1,330.40 in late New York. It hit an intraday high of
$1,340 on Friday -- its highest since early May.

Silver XAG= gained to $13.57/13.62 an ounce from
$13.36/13.41 in New York, having risen as high as $13.63 an
ounce -- its best level since early June.

Palladium XPD= rose as high as $339 an ounce, its highest
since Aug.16, before dipping to $338/343 an ounce, still higher
than $336.40/340.40 in New York.
Precious metals prices at 0753 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 736.10 3.10 +0.42 15.79
Spot Silver 13.56 0.19 +1.42 5.53
Spot Platinum 1338.00 14.60 +1.10 18.20
Spot Palladium 338.00 1.60 +0.48 1.81
TOCOM Gold 2746.00 27.00 +0.99 12.31
78175
TOCOM Platinum 4933.00 67.00 +1.38 15.96
42967
TOCOM Silver 504.80 15.80 +3.23 2.33
2796
TOCOM Palladium 1282.00 20.00 +1.58 2.15
739
Euro/Dollar 1.4076
Dollar/Yen 115.07
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.