Gold stayed near a 16-month high on Wednesday as Tokyo futures hit their highest in nearly seven weeks on a falling yen, after media reports that Prime Minister Shinzo Abe would resign sparked fears of political uncertainty.

Abe, struggling after a bashing at the polls and suffering low support rates, said in a later news conference he decided to resign on Wednesday, in the hope that a new leader would be better placed to deal with a crisis over Japan's support for U.S.-led operations in Afghanistan.

Spot gold stood at $711.60/712.40 an ounce as 0657 GMT, hovering near a 16-month high above $714 marked the previous day, as buying emerged in late Tokyo afternoon after a round of profit-taking.

A rise in oil prices above $78 a barrel supported the market as gold is generally seen as a hedge against oil-led inflation.

In New York, bullion rose as high as $714.20 on a weaker dollar and chart-based buying before easing to $711.90/712.50.

The benchmark August 2008 gold futures on the Tokyo Commodity Exchange (TOCOM) finished the session at 2,638 yen per gram, up 43 yen or 1.7 percent.

The contract earlier rose as high as 2,645 yen, the highest for any benchmark since July 26. The contract hit an intraday low of 2,561 yen on Monday, when a firmer yen sparked selling from investors.

A higher yen versus the dollar deflates yen-based TOCOM futures prices, encouraging domestic investors who have bought to unwind long positions.

Similarly, key August platinum futures rose on a falling yen and reached a four-week high of 4,774 yen a gram by late trade. The contract ended the day at 4,770 yen, up 43 yen or 0.9 percent.

Basically, there's no immediate impact from Prime Minister Abe's resignation, which is just domestic news, said Tatsufumi Okoshi, senior commodities economist at Nomura Securities.

Commodities markets would be affected in real terms if the Japanese economy deteriorates in the aftermath of the unexpected move or if the yen again becomes the least favored currency, he said.

As for today, yen-based buying as an indirect impact from his resignation causing a falling yen improved bullion's sentiment, he said.

Bullion sustained the momentum it has gained since a bleak U.S. jobs report last week increased volatility in other financial markets.

Investors are likely to prefer gold to stocks for a while, with the jobs report providing more proof of a slowdown in the U.S. economy, said Tatsuo Kageyama, an analyst at Kanetsu Asset Management Co Ltd.

Now, the bulls are taking advantage. The trend has changed since the jobs report from the United States, he said.

In the currency market the dollar fell to a new 15-year low against a basket of major currencies, hampered by expectations that the Federal Reserve would start cutting interest rates next week to counter the U.S. economy's slowdown.

A weaker dollar makes gold, which is denominated in U.S. dollars, cheaper for investors holding the euro and other currencies.

The euro exceeded the previous record in July to reach a record high, having risen as high as $1.3880 on electronic trading platform EBS.

The dollar slipped to 113.88 yen from around 114.30 yen in late New York, but off Monday's low of 112.60 yen.

U.S. crude oil futures traded at $78.07 a barrel, holding near a record high of $78.77 marked last month, after OPEC's token output increase failed to soothe consumers' worries about falling inventories.

Another support came from continued capital inflows to gold exchange traded funds (ETFs) listed overseas.

The latest data showed that bullion held to back StreetTRACKS Gold Shares, the world's largest gold ETF, surged to a record level of 566.95 tones. The current level was more than 50 tones higher than a month earlier.

(Additional reporting by Lewa Pardomuan in Singapore)