Gold retreated from record highs on Thursday as oil prices slipped, but the precious metal held within striking distance of $1,000 a troy ounce as the dollar struck an all-time low against the euro.
Spot gold jumped as high as $991.90 an ounce and was quoted at $984.40/985.70 at 1603 GMT, up from an earlier low of $959.45, but below the $985.70/986.50 late on Wednesday.
Traders said crude oil prices nearly $2 below the record high of $105.97 a barrel set earlier on Thursday and some profit-taking in thin markets were behind the fall in prices.
"Guess some speculators just got cold feet, maybe after the news that power deliveries to mines in South Africa are going to be raised to 95 percent," said Wolfgang Wrzesniok-Rossbach, head of marketing at precious metals group Heraeus. South Africa said it will let mines increase power consumption from 90 to 95 percent of normal because the country's power crisis has stabilised.
Analysts still expect gold to break through the $1,000 level, but think it may take several forays. Gold has gained nearly 20 percent in 2008 as funds, speculators and investors poured money into precious metals on expectation of further interest rate cuts in the United States and record-high oil, which lift its safe-haven appeal.
The dollar hit lifetime lows versus the euro. "The ongoing weakness in the dollar and fresh highs for oil look set to entice further anti-recessionary/inflationary hedging towards gold," TheBullionDesk.com said in a note. "The big question now is how much resistance lies ahead of $1,000."
Silver struck a 27-year high above $21 on strong speculative buying, platinum traded below an historical peak and US gold futures held just near record highs around $995 an ounce.
"It's an investor-driven story, with the investor demand coming from US dollar weakness. I can't see the trend abating anytime soon, with all the drivers of gold remaining in place," said Daniel Hynes, metals strategist at Merrill Lynch.
"Also inflation concerns seem to be rising on a daily basis and that certainly bodes well for gold ... $1,000 is a foregone conclusion now." The dollar's decline has been exacerbated by weak US economic data and worries about a recession, which has galvanised the US Federal Reserve to cut borrowing costs sharply to 3 percent, with further easing expected to come.
A weaker dollar makes gold cheaper for holders of other currencies. Gold is also seen as a hedge against inflation.
Gold has also jumped in other currencies, which is often seen as a bullish sign. The metal quoted in euros was at 644 euros an ounce, below this week's record high of 649.85 euros. It was last at 489 sterling, versus Monday's record of 497.55 sterling.
Platinum was down at $2,205/2,210 an ounce against $2,240/2,247 in New York on Wednesday. It hit a record high of $2,290 this week on supply concerns following power problems in South Africa, the world's top producer.
Mines in South Africa, have been operating at 90 percent of their usual power since late January after electricity shortages forced the mining sector to shut down for five days. Silver was at $20.45/20.50 late in New York. Spot palladium fell more than 5 percent to below $520 and was last at $521/526 an ounce from $552/556.