NEW YORK - Gold hit a record high on Friday as global stock markets gained on reassuring data about the health of the world's biggest economy and likely US interest rate cuts.
Expectations of US interest rate cuts weakened the dollar, while oil prices tumbled as weak Chinese demand expectations offset ongoing tensions in the Middle East, according to traders.
The gold spot price rose to a record high of $2,509.41 an ounce as investors snapped up the haven investment in the face of an increasingly likely US interest rate cut in September and heightened geopolitical risks.
"The sharp drop in bond yields amid expectations of rate cuts by the Fed" have pushed gold prices higher, said City Index and FOREX.com analyst Fawad Razaqzada.
All three major Wall Street indices shook off an early slump to close higher Friday, ending a positive week.
"We had very big moves over the past two weeks off the low," Adam Sarhan of 50 Park Investments told AFP. "And now we are only five percent below the all-time high."
"That shows us that there is still a lot of demand for stocks at lower prices," he added.
Weak US jobs data and a Japanese interest rate hike double-whammied stock markets at the beginning of the month, as investors who had financed investments in red-hot US tech shares by borrowing in weak yen faced the prospect of immense losses as the value of the Japanese unit bounded higher.
In Asian trading, the Nikkei 225 jumped 3.6 percent as the yen was lower against the dollar early in the day.
London bucked the positive trend in Europe as a strengthening pound weighed on multinationals earning in dollars.
On the corporate front, shares in German chemicals giant Bayer jumped 11.3 percent after a US court victory in the group's long-running fight against claims that its glyphosate-based weedkillers cause cancer.
Oil prices slumped, with the price of a barrel of Brent crude oil from the North Sea closing down 1.7 percent at $79.68 per barrel.
"The significant price recovery on the oil market has run out of steam in recent days," said Commerzbank analyst Carsten Fritsch.
"For one thing, the feared retaliatory strike by Iran (on Israel) has so far failed to materialize, which has probably favored a partial pricing out of the risk premium," he added. "In addition, new demand concerns are weighing on the market."
Major oil producer Iran has threatened to retaliate against Israel for last month's killing of Hamas political leader Ismail Haniyeh in Tehran -- which has been widely blamed on Israel.