(Updates with comment; refreshes prices; changes byline and dateline, prvs SINGAPORE)
By Amanda Cooper
LONDON, Oct 14 (Reuters) - Commodity prices surged on Thursday as the dollar buckled, driving gold to record highs, while copper touched its highest since July 2008 and crude oil and agricultural products rallied.
The dollar fell to its lowest against a basket of currencies in ten months, the Australian dollar soared to a fresh 28-year peak near parity and the euro jumped around 1 percent to $1.4095, its highest in more than eight months.
The 14-percent drop in the dollar against a basket of major currencies over the last twelve weeks has stemmed from anticipation of the U.S. Federal Reserve taking steps to create even looser monetary policy to encourage growth.
"It's all dollar-led. At the minute you don't have to be a metals strategist, you have to be an FX strategist," said Citi analyst David Thurtell.
Spot gold rose to an all-time high of $1,386.75 an ounce, and was last quoted at $1,380.50 at 1117 GMT, set for its largest weekly performance since late May.
Silver rose to a fresh 30-year top at $24.90 an ounce, and palladium hit its highest in more than nine years, at $603.
"If there is further dollar weakness surrounding quantitative easing and the like, it is almost certainly going to be highly supportive for gold," said RBS Global Banking & Markets analyst Daniel Major.
London Metal Exchange copper rose 0.8 percent to $8,420 a tonne, having touched a fresh 27-month peak at $8,490 earlier, while the third-position COMEX copper contract third month contract hit 383.40 cents/lb. Tin touched a new record at $27,250.
"It's the old story -- the talk on the U.S. stimulus package, and too much hot money around. What should you do? There is practically no interest rate, so everyone is rushing into commodities and the stock market," said Ronald Leung, a physical dealer at Lee Cheong Gold Dealers Ltd in Hong Kong.
"Until the interest rates turn around, we won't see a sharp drop in prices. For the short term, gold is still bullish. We'll reach $1,400 sooner than we expected."
Oil rose for a second day to approach five-month highs, with the November contract up $0.33 to $83.33 a barrel, approaching last week's four-month peak of $84.43.
A better fundamental backdrop for the oil market that includes falling inventories in the United States, recovering OECD demand and robust Chinese imports, is likely to prove supportive to oil if the Fed embarks on a fresh round of quantitative easing to keep monetary policy accommodative.
Christopher Bellew, oil broker at Bache Commodities, said Chinese demand for oil and the coming northern winter were supportive but the general rise in commodities was paramount.
"I think that right now the oil price is so strong because of the weak dollar and strong prices across all commodities as an asset class," Bellew said.
Ministers from the Organization of the Petroleum Exporting Countries decided in Vienna to keep oil production unchanged, sources said, with one delegate saying the 12 producer countries were "100 percent" agreed. The meeting was continuing and a formal decision had yet to be announced.
In the agricultural markets, U.S. corn, wheat and soybean futures rose, benefiting from the decline in the dollar and the prospect of a tightening balance between supply and demand.
Benchmark corn prices were last up 0.9 percent at $5.74-1/2 a bushel, just 2 percent shy of two-year highs struck on Wednesday. The rally started last week after the USDA pegged its estimate of U.S. corn production this year at nearly 300 million bushels below the average trade estimate.
"The dollar is the key driver as the fundamentals haven't really changed that much since last Friday's USDA report," said Brett Cooper, senior manager, markets, at FCStone Australia.
"The market was pretty shocked by how much the USDA cut corn yields while increasing consumption so the corn market has had to do a bit work to ration demand."
Other agricultural products also rose, with Tokyo rubber futures at their strongest in more than two years and Shanghai futures to a new record.
(Additional reporting by Jan Harvey, Melanie Burton and Christopher Johnson in London) (Editing by Keiron Henderson)
