LONDON, Nov 6: A tumbling dollar and strong oil prices prompted investors and speculators to buy gold heavily on Tuesday, with the metal hitting a 28-year high and trading about $30 below its record peak.

Platinum advanced to trade $1 below its all-time high of $1,465 an ounce, while silver surged to its highest in 18 months and targeted a 25-year peak of $15.17 hit in May 2006.

High prices sparked sales of gold scrap from Indonesia and Thailand to Singapore, a key centre for bullion trading in Southeast Asia. Physical buyers remained nervous in India, the world’s top gold consumer, ahead of a key festival this week.

It’s still largely a dollar story, but there is clearly more than that. Gold has just got momentum, Stephen Briggs, economist at SG Corporate and Investment Banking, said.

When oil goes up, it benefits gold but when oil goes down, it doesn’t damage the metal.All the evidence is that jewellery demand is now very much on the defensive, but that’s irrelevant if there are enough investors who thinks gold should go up.

Spot gold hit a high of $821.30 an ounce, its best level since January 1980 when it set a lifetime high of $850. It was last quoted at $820.85/821.55 by 1149 GMT, against $808.80/809.60 late in New York on Monday.

Last week’s strong US economic data failed to put a floor under the dollar’s broad slide and persistent fears about credit risks also continued to hurt the greenback.

Citigroup’s Sunday announcement that it may write off $11 billion of subprime mortgage losses has stirred worries that more write-downs could surface. The bank also saw its credit rating downgraded on Monday.

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

Oil jumped more than a dollar, rebounding to above $95 a barrel, as traders bet that falling US inventories and the approaching winter could help restart oil’s rally.

Gold also surged in some other currencies, with the metal quoted in sterling hitting a record high of 391.42 sterling per ounce. It traded at 561.74 euros, just below last year’s all-time high of 569.90 euros.—Reuters