Gold breaks above $900/oz on currency volatility

By Frank Tang and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold rallied 5 percent on Friday, briefly breaking above the $900 an ounce level as volatile currency markets and solid investment demand spurred bullion buying.

The precious metal reached record highs in both sterling and euro terms, signaling bullion's strength against not only the U.S. dollar but also currencies across the board.

"I think that people are coming to the new year realizing that the financial crisis is going to last longer than they had expected," said Caesar Bryan, portfolio manager of GAMCO Gold Fund.

Bryan, who manages $350 million in fund assets, said that more nervous investors were turning to gold because of high volatility in the foreign exchange market.

Spot gold rose as high as $902.50 an ounce, which was the loftiest price since October 10. It was at $895.80 an ounce at 2:19 p.m. EST, up 4.7 percent from Thursday's last trade of $855.50.

It rose to an all-time high of 700.37 in euro terms, and a record 659.71 pounds when priced in sterling.

U.S. gold futures for February delivery settled up $37.00, or 4.3 percent, at $895.80 an ounce on the COMEX division of the New York Mercantile Exchange.

"There is ongoing nervousness in the market about the banking sector," said Tom Kendall, precious metals strategist at Mitsubishi. "If you are looking to park your cash...there are not many options around and gold is one option."