Gold at record; resource plays boost stocks

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Gold powered to another record high on Monday, benefiting from its reputation as a hedge against inflation and sluggish economic growth, while oil and copper prices rose on a weaker dollar and supply concerns.

European stocks were set for a firmer start following gains in Asian shares, which were led by Australia thanks to higher resource stocks, although volumes were light with Japan out on holiday.

Many investors have been reducing their positions and cutting risk as a strong year begins to wind down and with economic indicators still showing scant evidence of a sustained recovery.

Highlighting the growing concerns evident in the market, yields on US 2-year Treasuries have fallen below 0.75%, approaching levels seen at the height of the financial crisis in December last year.

"It worries me that two-year yields are trading as they are plus (short-dated) bill rates went negative and gold is bid, bid, bid," said Robert Rennie, chief currency strategist at Westpac.

"It makes me think there is a huge flight to quality going on that hasn't hit FX yet, perhaps a bit of a warning sign."

The dollar, which often rises in times of increased uncertainty and worries about global growth, gave up early gains to slide 0.5% against a basket of currencies, while the commodity-linked Australian dollar benefited from the strong gold price.

Spot gold surged to a peak above USD 1,165 an ounce, extending gains to about a third so far this year.

Helped by its safe-haven allure and purchases by a number of central banks, gold has shot higher since the start of November, hitting a succession of record highs and gaining more than 12% in the past three weeks.

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