Gold hits record high on rate cut hopes

By Lewa Pardomuan

SINGAPORE (Reuters) - Gold hit a record high near $900 an ounce on Friday, driven by hopes of a half-point cut in U.S. interest rates later this month that could raise the metal's appeal as an alternative investment.

In the physical sector, fears of further rises ignited buying from jewellers in Indonesia and Thailand, but retail investors in other parts of Asia, especially Japan, cashed in on their holdings to take advantage of sky-high prices.

Spot gold rose as high as $898.00 before profit taking kicked in, mostly led by Japanese investors. It was later quoted at $893.40/894.20, still higher than $889.90/890.60 hit late in New York on Thursday.

COMEX gold futures also touched a record high, with the most active February contract rising as high as $899.90 an ounce before slipping to $896.3, up $2.7 from Thursday's close.

"We are not talking about $900 now. We are talking about $1,000," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

"Of course sentiment is really bullish, but I think the more bullish the market is, the more dangerous it is," he said.

Leung expected gold to trade in the $885 to $900 range on Friday but said the market could succumb to heavy profit taking, especially given the extent of long positions held by funds.

Gold, which rallied more than 30 percent in 2007, entered the new year on a firm note, rising more than 7 percent on a trail of market-friendly factors including a struggling dollar and record high crude oil prices.