GLOBAL MARKETS - Gold at record; Asia stocks limp on U.S. fears

Mouse-shaped gold figurines are displayed at a jewellery store in Hong Kong in this January 11, 2008 file photo. Gold hit a record near $900 an ounce on Monday as investors sought protection against a potential US recession and a weaker dollar, and Asian stocks remained pinned at more than three-week lows.

HONG KONG (Reuters) - Gold hit a record near $900 an ounce on Monday as investors sought protection against a potential U.S. recession and a weaker dollar, and Asian stocks remained pinned at more than three-week lows.

But Taiwan stocks rose 1.8 percent to a one-week high following a resounding win by the China-friendly Nationalist Party (KMT) in Saturday's legislative elections, sparking hopes of an easing in cross-strait tensions.

After Wall Street's near-2 percent drop on Friday, financial bookmakers predicted European stocks would open lower on Monday, forecasting Britain's FTSE 100 would start 22-27 points down, Germany's DAX 18-24 points lower and the French CAC 40 down 17-23 points.

Asian stocks have posted their worst start to the year since the region's financial crisis in 1998, according to Reuters calculations. A decade later, worries about a slowdown in the United States, Asia's biggest export market, and the U.S. housing sector, are hitting Asian shares.

The uncertainty has boosted the value of safe haven assets such as gold, with investors steering clear of stocks at the start of a week in which U.S. financial heavyweights such as Citigroup and Merrill Lynch are expected to post big losses and more capital raising plans.

"Buying appetite has emerged after stocks dropped sharply last week, but a meaningful rebound is unlikely as investors look ahead to U.S. economic data and earnings from U.S. financial institutions," said Lee Kyung-soo, an analyst at Daewoo Securities in Seoul.

MSCI's measure of Asia Pacific stocks excluding Japan was off 0.03 percent as of 0635 GMT, after earlier touching its lowest level since Dec. 20. Tokyo markets were closed for a holiday.

South Korean shares were down nearly 1 percent, while markets in Australia and Hong Kong were flat to a touch lower.

Wall Street dropped sharply on Friday following warnings, including from credit card issuer American Express Co, about slowing U.S. consumer spending, a bad omen for Asian exporters.

The worsening outlook for the world's largest economy threatens to cripple what has been strong growth in Asia, with stock markets posting double-digit gains in 2007, as reflected in the one-third rise in the MSCI regional index.

GOLD NEAR $900

Investors continued to shift to safety, opting for gold, which rose to a record $898.70 an ounce by 0640 GMT, near a psychological $900 level, helped by rising expectations of aggressive U.S. rate cuts by a Federal Reserve trying to ease the impact of a likely U.S. economic slowdown.

"There's blue sky ahead and there's room for gold to go higher. We are in uncharted territory, really," said Darren Heathcote of Investec Australia in Sydney.

"We have a weaker dollar and that's encouraged people to buy gold. We are going to be drawn towards $900 and test it."

This year's gold rally comes as the dollar has extended its weakness into 2008 on the back of the worsening outlook for the U.S. economy, with the currency hitting a six-week low against the euro on Monday.

Oil edged higher, reversing falls earlier in the session, with U.S. crude futures for February delivery up 38 cents to $93.07 a barrel.