Gold touches 27-yr high on steeper oil prices

Gold rose in London to the highest since 1980 as record crude oil prices and declining value of the dollar against currencies, including the euro, spurred demand for the metal as a haven. Silver climbed to an eight-month high.

Gold has gained 25 per cent this year, with gains accelerating since late August on signs of increased jewellery and investor purchases.

Gold jewellery demand will probably exceed mine supplies this year after a surplus last year, London-based research company GFMS forecast last month.

"We've entered the gold-buying season driven out of West Asia and now we're seeing more buying out of China," said Tim Dudley, an analyst at Arbuthnot Securities in London.

Gold for immediate delivery rose $7.75, or 1 per cent, to $792.95 an ounce at 9:21 a.m. after earlier climbing to $794.70, the highest since January 1980. A 25 per cent rise for the year would be the biggest annual advance since 1979.

Eighteen of 23 traders, investors and analysts surveyed by Bloomberg last week said they expect gold will rise this week as speculation mounted that the Federal Reserve will lower interest rates in two days. Three said to sell and two were neutral. "If rates are lowered, that is supportive for gold," Dudley said.

Silver increased 19 cents, or 1.3 per cent, to $14.42 an ounce after earlier advancing to $14.455, the highest since February 27.