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LONDON - Precious metals raced higher on Tuesday, boosted by an ailing dollar and strong oil, with gold hitting 28-year highs, silver soaring to its best price in 27 years and platinum setting a record.

High prices sparked sales of gold scrap from Indonesia and Thailand to Singapore, a key center for bullion trading in Southeast Asia. Physical buyers remained nervous in India, the world's top gold consumer, ahead of a key festival this week.

"It's just renewed vigor in the market, and a belief that right now gold is unbeatable. The market has no faith in the U.S. dollar. What we are seeing is money continuing to come out of the dollar and going into gold," said Peter Hillyard, head of metals sales at ANZ Investment Bank.

"There is a chance that this market may have to consolidate, but we will go to $850 by January -- not 'may' but 'will.' It's a done deal. It's going to happen."

Spot gold hit a high of $824.30 an ounce, its best level since January 1980. It was quoted in New York at $820.90/821.70 by 2:15 p.m. (1915 GMT), against $808.80/809.60 late in the U.S. market on Monday.

Gold hit an all-time high of $850 in January 1980, when investors bought heavily in the face of high inflation linked to strong oil prices, Soviet intervention in Afghanistan and the effects of the Iranian revolution. After adjusting for inflation, that level was equal to $2,079 at 2006 prices.

The dollar fell to all-time lows against the euro and a basket of major currencies as investors feared that fall-out from credit turmoil was far from over and the Federal Reserve would have to cut interest rates further.

"The dollar is the biggest, biggest issue in this market here. Crude at all-time high, and dollar at all-time lows. The metals have to rally," said Joseph Guzzardi, a floor trader at Sabin Commodities in New York.

A weaker dollar makes gold cheaper for other currency holders and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.

Oil jumped more than $3 to a record high above $97 a barrel as the U.S. government predicted robust demand and tight output from the Organization of Petroleum Exporting Countries would lead to a supply crunch.