Gold powered to another record high on Monday as the dollar sank, while higher commodity prices lifted world equities.

MSCI's all-country world stock index was up 0.9 percent, led by European and emerging market shares that are sensitive to commodities.

Gold hit a record high at $1,167.35 an ounce before slipping back a bit, bringing this year's gains to around 32 percent.

The main catalyst for gold's rise has been the falling dollar, which makes the metal more attractive to non-dollar investors and encourages others to hedge.

The US currency was down nearly three-quarters of a percent against at basket of competitors, closing in on 15-month lows. It is being battered by expectations that the US Federal Reserve will keep interest rates low for some time.

"The Fed is sounding like they mean it about keeping rates low for an extended period -- way into 2010 if not 2011," said a trader at an Australian bank.

Such a backdrop has driven large numbers of investors into gold, which also benefits from a reputation as a safe haven in times of economic uncertainty.

"You've got more high-profile hedge funds visibly investing in gold. That's yet another factor encouraging moves into gold by the wider investor community," said David Barclay, commodity strategist at Standard Chartered in Hong Kong.

Gold's gain lifted other precious metals, while oil gained 90 cents to $78.36 a barrel and commodities such as copper also gained. Copper was up 1.7 percent, aluminium was half a percent higher and nickel rose 1.6 percent.

European shares were one of the main beneficiaries of the rise in commodity prices. The pan-European FTSEurofirst 300 index of top shares was up 1.4 percent, snapping a four-day losing streak.

Energy stocks were in demand because of the oil price gain. Among big movers were Heritage Oil, which sold its Ugandan interests to Italy's Eni. BG Group, BP, Royal Dutch Shell and Total all also rose.

Miners also featured among the top performers as metal prices gained, including  Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corporation, Rio Tinto and Xstrata.

Despite this, there is a general tone of caution from  investors at the moment, with many interested in locking in their 2009 gains before the year end. -Reuters