Gold rallies to record $1,000

By Atul Prakash and Anna Ringstrom

LONDON (Reuters) - Spot gold prices hit an all-time peak in Europe on Thursday as a dollar slump and inflation fears prompted investors to look for safe-haven assets.

Spot gold rose as high as $999.90 an ounce and was at $991.00/991.80 at 2:15 p.m EDT (1815 GMT), compared with $981.90/982.70 late in New York on Wednesday.

This sparked buying of U.S. gold futures, which extended a record-breaking advance across the $1,000-an-ounce threshold. Analysts said spot prices could soon reach that level as well.

The active U.S. gold contract for April delivery on the COMEX division of the New York Mercantile Exchange settled up $13.30, or 1.4 percent, at $993.80 an ounce. It had soared to a record high of $1,001.50.

"I think there is more upside for gold and generally the precious metal complex because the Fed is going to be delivering a very negative real interest rate environment and that is great for gold," said Michael Lewis, global head of commodities research at Deutsche Bank.

The dollar fell below the key 100 yen mark for the first time in over a decade, and to fresh record lows versus the euro, on deepening worries over the U.S. economy entering a recession.

"Gold is interesting because it also suggests that there are inflationary pressures out there in the world economy," said Chris Iggo, strategist at AXA Investments.

"Arguably, you're getting into bubble conditions for some of the commodities ... I can't see it ending any time soon, that's the problem. As long as the Fed's continuing to ease and the dollar's weak it's going to push up commodity prices further."