UPDATE 3-Gold strikes 28-year on record-high oil, eyes $800

(Updates with closing in Tokyo)

By Lewa Pardomuan

SINGAPORE, Oct 29 (Reuters) - Gold rallied to its highest
level in nearly three decades on Monday as speculative buying
gained pace after crude oil struck a record high on tensions in
the Middle East and the U.S. dollar tumbled to an all-time low.

Not to be outdone, platinum touched a record high before
slipping, silver rallied to its best level in eight months and
palladium hit a two-week high. Physical trade came to a
standstill as jewellery makers watched gold prices gyrate.

Spot gold XAU= hit a high of $794.40 an ounce, its best
level since January 1980, which was also driven by expectations
the U.S. Federal Reserve will cut interest rates this week.
Gold was last quoted at $783.80/784.30 in New York on Friday.

"I think the market will aim for $800," said Darren
Heathcote of Investec Australia in Sydney.

"I suspect there will be some selling pressure just before,
should we get that high. But certainly, the fundamental reasons
are still holding good that oil prices are high and there's
geopolitical concern and the dollar is weak," he said.

Gold has risen more than 20 percent this year as
record-high oil prices elevate its role as a hedge against
inflation and a struggling dollar lifts its appeal as an
alternative investment.

A lower dollar makes gold, which is denominated in U.S.
dollars, cheaper for holder of other currencies.

The new benchmark October 2008 gold contract on the Tokyo
Commodity Exchange <0#JAU:>, which debuted on Monday, hit a
23-year high of 2,943 yen per gram before ending at 2,938 yen.
The contract opened at 2,922 yen.

Gold scored an all-time high of $850 in January 1980, when
investors bought the metal heavily in the face of high
inflation linked to strong oil prices, Soviet intervention in
Afghanistan and the impact of the Iranian revolution.

After adjusting for inflation, that level was equal to
$2,079 an ounce at 2006 prices, according to metals consultancy
GFMS Ltd.

"All news is in favour of gold. Maybe we'll see $800 this
week," said Ronald Leung, director of Lee Cheong Gold Dealers
in Hong Kong.

There was only light selling on the physical side, which
suggested that investors were waiting for more rises before
cashing in, said Leung.

Oil CLc1 hit a record high above $93 a barrel on Monday
on winter supply fears and as Turkey's attacks on Kurdish
rebels sparked worries of supply disruptions from northern
Iraq.

There are also concerns over the potential wider regional
fallout if Turkey follows through with threats to launch
attacks inside northern Iraq if necessary.

"Gold is pushing upwards on safe-haven buying to hedge
against a declining U.S. dollar. The market is pricing on the
Federal Reserve's interest rates cut," said William Kwan, a
dealer at Phillip Futures Pte Ltd in Singapore.

He pegged gold's upside target at $810 an ounce.

The dollar tumbled to a record low against a basket of
major currencies on expectations the Fed will cut interest
rates this week and possibly again later this year.The dollar's
trade-weighted index against six major currencies .DXY fell
as low as 76.827, an all-time low.

The Fed is widely seen cutting rates by a quarter-point to
4.5 percent on Wednesday, while expectations are building for a
follow-up cut in December to limit economic damage from the
housing market's downturn. [ID:nN26361490]

"I believe silver is still a bit lagging. If investors or
market players wish to take note of any good investment for
this week, look at silver," said Kwan of Phillip Futures.

"Maybe silver can try $14.90 first for the week," he said.

Silver XAG= hit an intraday high of $14.43 an ounce, its
best level since late February and up from $14.20/14.23 late in
New York.

Silver hit a 25-year high of $15.17 in May last year, and
dealers said the growing popularity of exchange-traded funds
will also generate investor interest.

Platinum XPT= rose to an all-time high of $1,464 an ounce
to reflect gains in gold. It was last quoted at $1,454/1,458 in
New York. Tokyo platinum futures <0#JPL:> also hit record high.

Palladium XPD= hit a bid high of $373 an ounce, higher
than $372/376 late in New York.

COMEX futures rose in Asia, with the most active December
contract GCZ7 up $8.7 an ounce at $796.2 from the New York
settlement.

Bullion used to back StreetTRACKS Gold Trust GLD.N, the
world's biggest gold exchange-traded fund, climbed to a record
597.53 tonnes on Friday. However, the tonnage growth of the
gold ETFs has slowed in October, analysts said.
(Additional reporting by Miho Yoshikawa in Tokyo)