Gold traded above $US500 on Tuesday for the first time in 18 years as the US dollar reversed course and cashed-up speculative investors, wary of geopolitical tensions and distrustful of paper assets, looked for an alternative to oil, equities and bonds.

Spot gold jumped to $US500.25 in morning trade in Asia, a level not seen since December 1987. The move higher followed a sharp hedge fund-driven reversal overnight in the US currency.