Gold hit a record high on Friday as global stock markets diverged, with profit-taking on Wall Street while European and Asian markets gained on reassuring data about the health of the world's biggest economy and likely US interest rate cuts.

Expectations of US interest rate cuts weakened the dollar, while oil prices tumbled as weak Chinese demand expectations offset turmoil in the Middle East, according to traders.

Gold rose to a record high of US$2,500.16 an ounce as investors snapped up the haven investment in the face of an increasingly likely US interest rate cut in September and heightened geopolitical risks.

"The sharp drop in bond yields amid expectations of rate cuts by the Fed" have pushed gold prices higher, said City Index and FOREX.com analyst Fawad Razaqzada.

Wall Street's major indices dipped at the start of trading after rallying on Thursday following stronger-than-expected retail sales data that dispelled fears the US economy is heading for a recession.

"These aren't big moves at all relative to the gains that have preceded them, yet buyers aren't rushing in to buy the dip just yet knowing the market has come a long way in a short amount of time," said Briefing.com analyst Patrick O'Hare.

He noted that the S&P 500 is up more than eight percent from its August 5 low and the Nasdaq Composite has gained 12 percent.

Oil prices slumped more than 1.5 percent, Brent North Sea crude falling under US$80 per barrel.

"The significant price recovery on the oil market has run out of steam in recent days," said Commerzbank analyst Carsten Fritsch.

"For one thing, the feared retaliatory strike by Iran (on Israel) has so far failed to materialise, which has probably favoured a partial pricing out of the risk premium. In addition, new demand concerns are weighing on the market."

Major oil producer Iran has threatened to retaliate against Israel for last month's killing of Hamas political leader Ismail Haniyeh in Tehran. (AFP)