Jan. 3 (Bloomberg) -- Gold held near a record as crude oil gains and the dollar's decline against major currencies boosted demand for alternative investments.

Crude oil reached a record $100 a barrel and gold soared to its highest ever yesterday as the dollar's slump against major currencies increased the appeal of raw materials as an inflation hedge. Geopolitical uncertainty including violence in Nigeria, the Middle East and Pakistan spurred demand for gold as a haven. Newcrest Mining Ltd., Australia's biggest gold miner, rose to a record today, leading gains in rival producers.

``The U.S. economy is showing no sign of improvement, even as the weaker dollar and higher oil add to inflation,'' Lin Yuhui, research manager at China International Futures Co. in Shenzhen, said by e-mail today. ``All this is pushing gold higher. A move strongly above $900 is a very real possibility.''

Bullion for immediate delivery was little changed at $857.45 an ounce at 2:46 p.m. Singapore time. Gold gained to a record $860.10 an ounce yesterday, as oil reached $100 a barrel. Silver for immediate delivery was little changed at $15.23 an ounce.

Oil rose as much as $4.02, or 4.2 percent, to $100 a barrel yesterday, and stood at $99.50 a barrel in after-hours trading on the New York Mercantile Exchange at 2:46 p.m. in Singapore.

The dollar fell the most against the yen and Swiss franc yesterday after a private report showed U.S. manufacturing unexpectedly contracted in December, fueling expectation the Federal Reserve will cut borrowing costs to bolster the economy.

Hedge Funds

Gold benefited from the increased odds of a rate cut in the U.S., Ellison Chu, manager of precious metals at Standard Bank Asia Ltd., said by phone from Hong Kong today. In 2007, gold climbed 31 percent, its seventh straight annual gain.

The dollar traded at $1.4718 per euro at 2:47 p.m. in Singapore after falling 0.8 percent yesterday. It dropped to $1.4967 on Nov. 23, the lowest since the euro's introduction.

Hedge-fund managers and other large speculators increased their net-long positions in New York gold futures in the week ended Dec. 25, according to the latest data from the U.S. Commodity Futures Trading Commission. Investment in the StreetTracks Gold Trust, a bullion-based, exchange-traded fund listed in the U.S. and Singapore, surged 39 percent last year to a record 628 metric tons.

Gold is a ``flight to safety right now,'' said Uri Landesman, portfolio manager at ING Investment Management, in a Bloomberg Television interview yesterday. Gold prices remained inexpensive stripping off inflation factor, he said.

``Gold has been on a tremendous run over the last few years, but if you go back 20 years, it's trading at less than half of the value that it was trading at 20 years ago,'' Landesman said. ``We think in the next 3 to 5 years, it's very possible that it returns to that $1,800 level.''

Possible Drop

Gold prices may move sharply downward should these ``long positions start to unwind'' in the event of falling oil prices or a rebound in the U.S. dollar, Anderson Cheung, deputy managing director of precious metals at Mitsui Bussan Precious Metals (HK) Ltd., said by phone from Hong Kong today.

``I remain a bull for gold and I think gold has chance to reach $900 an ounce in the first two quarters,'' Cheung said. ``But right now it rose too much too fast.''

Gold gained more than $20 an ounce yesterday and increased more than $50 since before the Christmas holiday, Cheung said.

February-delivery gold on the Comex division of the New York Mercantile Exchange was little changed at $860.70 an ounce in after-hours trading at 2:48 p.m. Singapore time. The contract touched $864.90, the highest for a most-active contract since Jan. 21, 1980, the day futures touched a record $873.

To contact the reporters for this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Feiwen Rong in Singapore at frong2@bloomberg.net

Last Updated: January 3, 2008 02:03 EST