Gold ends 3.7 pct higher as funds buy, oil soars

By Frank Tang and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold ended nearly 4 percent higher on Thursday with funds pouring into commodities as a tumbling stock market amid oil's surge to a new record high boosted bullion's appeal as an alternative investment.

Gold was at $912.60/913.60 by New York's last quote at 2:15 p.m. EDT, up from $879.60/880.60 an ounce late in New York on Wednesday. Earlier in the session it touched $916.40, its highest level since May 27.

Zachary Oxman, senior trader of Wisdom Financial in Newport, California, cited institutional investors rotating funds back into commodities due to weaker equities.

"It's a repatriation into the commodity trade, mostly out of the stock markets. Commodities is still one safe place so far this year, as stocks have been volatile and tough to make money," Oxman said.

The U.S. gold contract for August delivery on the COMEX division of the New York Mercantile Exchange settled up $32.80, or 3.7 percent, at $915.10 an ounce.

It was the biggest one-day absolute gain for a COMEX gold contract on a front-month delivery basis since March 1985.

U.S. stocks sank 2.5 percent in late trade as recession worries were increased by fears of oil prices rocketing higher.

In addition, the dollar extended losses against major currencies as expectations for a U.S. rate hike receded after comments from the Federal Reserve on Wednesday.