Bullion rose as much as 1 per cent on Monday as Japan battled to prevent a nuclear catastrophe after a massive earthquake and tsunami, sending premiums for gold bars to their highest level since February in Tokyo.

A badly wounded nation has seen whole villages and towns wiped off the map by a wall of water, bringing in its wake an international humanitarian effort of epic scale. More than 10,000 people are feared to have been killed.

Spot gold added $4.74 to $1,422.44 an ounce by 0429 GMT after rising as high as $1,431.89 an ounce as markets began estimating the huge economic costs caused by the disaster.

Bullion was still off a record high of $1,444.40 hit last week.

"Some investors expect some of the Japanese insurance companies to start selling their dollar assets to raise money. Perhaps gold could be boosted as an alternative currency itself," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.

"In the short term, I think gold prices will head up due to a flight to safety and investors seeking out a safe haven."

US gold futures for April rose $1.2 an ounce to $1,423 an ounce.

Silver was off an intraday high. Platinum fell more than 2 per cent to its weakest since early January on falling equities, putting pressure on palladium.

Both metals are mainly used in auto catalysts. Toyota Motor Co. said on Monday it had halted production nationwide until March 16 following the earthquake.

"Platinum is falling all the way down because the global economy doesn't seem to perform well," said a dealer in Hong Kong. "There's a lot of mess around," said the dealer, referring to the quake in Japan, deadly unrest in the Middle East and Europe's sovereign debt problem.

Japanese stocks fell 7.6 per cent, on track for the biggest daily loss since October 2008, and bond yields rose investors expected the earthquake and tsunami that devastated the country's northeast to take an economic toll and require heavy government borrowing.

The dollar rebounded from near record lows against the yen on Monday, boosted by hedge fund buying after the Bank of Japan's injected 7 trillion yen into the money market to help ease nervousness following the earthquake.

In the physical market, premiums for gold bars jumped to their highest since February after the quake sharpened fears of inflation.

"The Japanese market is a bit tight on gasoline, so there are inflation risks. That's why Tokyo premiums are a bit higher," said a dealer at a bullion trading house in Tokyo.

Gold bars were quoted at a premium of $1 an ounce to the spot London prices in Tokyo, up from zero last week and a discount of 50 cents two weeks ago.

Japan will move quickly to import more liquefied natural gas and low-sulphur fuels to generate power at thermal plants and replace nuclear electricity supplies put out of action after the nation's worst earthquake in recorded history.

Moody's Investor Service said it was awaiting a full assessment of the damage from Japan's devastating earthquake and tsunami, but said the impact was worse than initially expected.

Premiums were steady in other parts of Asia, with no signs of an increase in buying related to the disaster in Japan.

Dealers quoted premiums at $1 to the spot London prices in Singapore and at between $1 and $1.5 in Hong Kong.

"There's a small amount of buying by jewellers. They are covering stocks. I think people are just watching the development in Japan, whether there will be more tsunami or how the economy is behaving," said the dealer in Hong Kong.

The world's largest gold-backed exchange-traded fund, SPDR Gold Trust , said its holdings edged down to 1,215.475 tonnes by March 11, their lowest since May 2010, from 1,217.295 tonnes on March 7, as some investors booked profits from gold's rise to a record.

Brent crude touched a two-week low near $111 on Monday, down by nearly $3 on investor pessimism that economic growth will slow after Japan's earthquake and tsunami, while easing unrest in the Middle East threw the focus back onto ample oil supplies. – Reuters