Metals plunged 10 per cent on fears that financial turmoil would hit raw material demand, but gold rose to its strongest in more than two months as frantic investors chased risk-free assets.

As Asian stocks dropped, led by a fall of more than 10 per cent in Japan's Nikkei, commodity investors also scrambled out of the markets as concern grew that efforts to unlock battered credit markets were not working.

"In the midst of the bloodbath in the equity markets, gold will probably be the standout winner here," said Adrian Koh, an analyst at Phillip Futures in Singapore.

"I think a lot of people will be speculating about $1,000 gold again, and I personally think it's not very far away."

Bullion has gained more than 11 percent this week as investors frantically searched for safe-haven assets after heavy losses in equities markets sparked fears the global economy was shifting towards recession.

Gold rose $2.45 or 0.27 percent to $913.95 an ounce from New York's notional 0401 GMT close, its fifth day of gains, at one point hitting $925.05, its highest since July 31. It is now just 11 percent off its all-time peak of $1,030.80 in March.

Japan's Nikkei tumbled more than 11 percent, poised for its biggest one-day drop since the 1987 crash, on fears that a global recession was now unavoidable.

In theory, weak share prices boost gold's appeal as an alternative investment. Oil fell more than $4 a barrel, extending losses to another one-year low on fears of falling demand that prompted Opec to hold an emergency meeting on November 18 to discuss the impact of the financial crisis on the market.

Investors, who earlier this year piled into oil and other commodities as a hedge against inflation and the weak dollar, are putting cash into safer investments and have sent oil plummeting more than $60 from its record high above $147 a barrel in July.

As panic in equities spread to industrial metals, London Metal exchange copper fell $465 to $4,850 a tonne, after dipping as low at $4,830, its weakest since March 2006.

"It's one-way traffic. The panic emanating from stock markets is spreading. Our guys in London say copper could fall to $3,000. On the charts, $3,500 to $4,000 look credible," MF Global analyst Edward Meir said.

"But people are ignoring charts. What looks like strong support crumbles in this environment." Copper last traded around $4,000 in late 2005.-Reuters