Gold prices shoot up to $1,030

Gold prices shot up to record highs today as investors fled to safe haven assets on the back of deepening worries about the US financial sector and new lows for the dollar.

Spot gold traded at $1,023.95/1,025.00 an ounce at 11.37am after hitting a high of $1,030.80. On Friday, it closed at $996.90/997.70 in New York.

"The current macro-economic backdrop, particularly in the United States, is bringing new buyers into the gold market. The downward pressure on the dollar and general uncertainty are supporting the market," said Michael Widmer, analyst at Lehman Brothers.

"What is really important for this week is to see what the Fed is doing," he said.

The US Federal Reserve unexpectedly cut its discount rate on Sunday and opened up discount window lending to major investment banks - a tool not used since the Great Depression - in a sign of its deep concern over the current crisis.

Investors also expect the Fed could slash overnight rates by up to 125 basis points by the end of its meeting tomorrow.

JPMorgan Chase & Co said yesterday it would buy stricken rival Bear Stearns for just $2 a share in a deal that values the US investment bank at about $236 million.

But these measures didn't restore investors' confidence. Instead, the dollar tumbled to a record low against the euro on worries there would be more casualties in the widening US financial crisis.

A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.