GLOBAL MARKETS-Gold hits record on inflation fear, dollar up

* Gold, commodities surge on inflation fears

* US stocks zigzags after touching multiyear highs

* Euro zone debt worries hangs over currency market (Updates with European stocks' close)

By Manuela Badawy

NEW YORK, Nov 9 (Reuters) - Gold surged to another record and oil rose to a two-year high on Tuesday, driven by inflation expectations even as the dollar rebounded against the euro.

The Federal Reserve's decision to undertake more stimulus by printing more money to buy $600 billion in U.S. bonds has hit the dollar of late, leading many to worry about inflation.

Commodities, which are priced in dollars, benefit from the weakness of the U.S. currency.

With an economy that is growing at just a 2 percent annualized clip and an unemployment rate that remains stuck at 9.6 percent, the Fed decided to flood more dollars into the financial markets to boost the anemic recovery.

Investors fear the Fed's policy will lead to high inflation and worry that low interest rates in the United States risk fueling asset bubbles in other countries and destabilizing currencies.

"We have a combination: inflation fears, currency market uncertainty, fears about the financial strength of some countries," said Alexander Zumpfe of Heraeus Metals.

Heavily indebted countries such as Ireland, Portugal and Spain are back in the headlines, with the cost of protecting their government debt against default rising substantially in the past week.

The renewed concerns weighed on the euro , which hit its lowest in more than a week versus the dollar. It was last trading down 0.37 percent at $1.3869.

Heavy Asian and Middle Eastern buying helped lift the euro off a $1.3823 session low, traders said, but it stalled below $1.40. Some traders also closed long positions against the dollar ahead of year-end book-closing.

The dollar was up against a basket currencies, with the U.S. Dollar Index <.DXY> rising 0.21 percent at 77.183. Against the Japanese yen, the dollar was down 0.04 percent at 81.13.

U.S. equities slipped after five weeks of gains, but an index of gold and silver miners' shares <.XAU> hit an all-time high. Shares of Barrick Gold rose 2.5 percent to $52.50.

The Dow Jones industrial average <.DJI> was down 35.27 points, or 0.31 percent, at 11,371.57. The Standard & Poor's 500 Index <.SPX> was down 3.69 points, or 0.30 percent, at 1,219.56. The Nasdaq Composite Index <.IXIC> was down 4.89 points, or 0.19 percent, at 2,575.16.

European shares <.FTEU3> shrugged off euro zone debt concerns to close at their highest level in more than two years with the pan-European FTSEurofirst 300 <.FTEU3> index of top shares up 0.6 percent at 1,117.46 points, its highest close since September 2008.

The MSCI all-country world equity index <.MIWD00000PUS> eased 0.03 percent. Emerging market stocks <.MSCIEF> were up 0.16 percent.

"Quantitative easing, decent macroeconomic data and valuations have helped equities to move higher. Earnings have also played a big role," said Klaus Wiener, head of research at Generali Investments, in Cologne.

"We are in a year-end rally and I don't see any disturbance from the macro data side. The only thing which could be a bit of a problem is the situation in countries like Ireland but this is not being perceived as something which could derail the whole monetary union project."

COMMODITIES RISE, G20 EYED

Gold's rise was assisted by the Fed's decision to print dollars to buy U.S. government debt, which weakened the dollar and spurred commodity prices higher. Gold has gained nearly 30 percent this year so far.

Spot gold prices rose $11.85, or 0.84 percent, to $1,420.90 an ounce, while silver touched $28.46 an ounce, the highest since March 1980.

U.S. crude oil rose 4 cents, or 0.05 percent, to $87.10 per barrel, after touching $87.63, its highest since October 2008 following the release of the International Energy Agency's long-term energy outlook, in which it said oil prices might exceed $100 a barrel in 2015 and $200 in 2035.

U.S. government bond prices fell after data on U.S. wholesale inventories showed a larger than expected rise, fueling questions about whether inventories were gathering dust on shelves.

The benchmark 10-year U.S. Treasury note was down 11/32, with the yield at 2.5974 percent. The 2-year U.S. Treasury note was down 2/32, with the yield at 0.4228 percent. The 30-year U.S. Treasury bond was down 35/32, with the yield at 4.1915 percent. (Additional reporting by Edward Krudy in New York and Pratima Desai, Atul Prakash and Maria Golovnina in London; Editing by Kenneth Barry)