NEW YORK (Reuters) — As a global economic crisis deepens, gold has not only held firm in dollar terms but also appreciated against other non US currencies, and strong physical buying despite higher prices signals the metal has legs to rally further.

A flight to safety amid economic uncertainties has bolstered the dollar and the yen, which hurt dollar-denominated gold and made bullion more expensive when priced in other currencies.

On Wednesday, gold traded at around $810 an ounce, about 20 percent below its all-time high $1,030.80 in March, driven by a dollar resurgence and deflationary pressure in the wake of plummeting crude oil and a global recession.

"Gold is a dollar denominated commodity, and all dollar-denominated metals and oil have been bludgeoned," said Bill O'Neill, managing director of New Jersey-based LOGIC Advisors.

Even though gold was not immune to the current wave of wholesale liquidation across all asset classes, the drop of other commodities, such as crude oil, and the stock market has dwarfed bullion's decline.

The Reuters/Jefferies CRB index, a global commodities benchmark, has lost half of its value from its record high in July, while the broad-based Standard & Poor's 500 is 45 percent below its record in October.

"What it shows you is that gold is holding up really well in an environment where commodity prices are being crushed, despite the fact that you have its sell-off in dollar terms," said John Reade, head of precious metals strategy at UBS in London.

LOGIC's O'Neill said that there has been very good physical demand in Europe and India in spite of higher bullion when priced in local currencies.

Gold priced in euros rallied to a record high 685.37 euros an ounce on Oct. 10, which can be attributed to the dollar strength relative to the euro and other currencies.

"I do think that this is indicative of a market that actually has performed reasonably well despite the huge dollar pressure," O'Neill said.

In top gold buyer India, gold priced in rupees also jumped in October to its loftiest level in more than two years, but physical bullion buying there showed no signs of abating.

"The dollar-gold price has been falling faster than the rupee weakening, and that's one of the things that is encouraging buying," Reade said.

A closely watched industry report by GFMS Ltd showed that global gold demand jumped 18 percent year-over-year to 1,133.4 tonnes in the third quarter as investors in India and elsewhere hoarded gold bullion coins and bars and jewellery buying rose.

The massive market stimulus plans by the US government to keep the economy afloat would lead to a weakening dollar and higher inflation, and that should bode well for gold in the longer term, fund managers and analysts said.

Axel Merk, manager of Merk Hard and Asian Currency Funds in Palo Alto, California, said the dollar had risen sharply as investors sought shelter in US Treasury bills, which was clearly a sign of panic buying.

Merk, who oversees $300 million assets, said dollar-denominated gold would benefit as the US government needed to raise an "unprecedented" amount of money to pump into every corner of the economy.

"The US dollar, in my view, has to come down on the back of that. I believe it will come down versus all currencies," Merk said.

Market watchers are optimistic that gold would rise in 2009 as deleveraging ceases.

"Gold could be well setting itself up for a nice rally as we move into next year because the dollar will probably top out and there is inflation in the pipeline," O'Neill said.