PRECIOUS-Gold hits $980 as dollar slide gathers pace

* Gold hits $980 per troy ounce; highest since late Feb

* Dollar hits 5-month lows vs basket of currencies

* Investors sniff chance for rush to $1,000 mark

(Updates prices)

By Jan Harvey

LONDON, May 29 (Reuters) - Gold jumped to a new three-month high at $980 per ounce on Friday as traders bought the metal as a hedge against weakness in the dollar, which fell to five-month lows against a basket of currencies.

Spot gold XAU= was up 1.9 percent to $977.60 an ounce at 1605 GMT, compared with $958.80 late on Thursday. U.S. gold futures for June delivery GCM9 on the COMEX division of the New York Mercantile Exchange surged to $982 an ounce, its highest sice late Febuary.

Analysts said the restablishment of bullion's inverse correlation with the dollar had put further milestones in view.