* Australian benchmark races past key 6,900-point level
* Australian stocks set for 2.7% weekly gain, best in 11 months
* Gold stocks set to snap third straight weekly gain
* Evolution Mining tumbles 6.6% on disappointing outlook
By Rashmi Ashok
Jan 10 (Reuters) - Australian shares soared to record highs on Friday in a relief rally as easing tensions in the Middle East and hopes of Washington and Beijing signing a Phase 1 trade deal next week boosted risk appetite.
Washington and Tehran backed off from further conflict after a spike in tensions following the U.S. killing of a top Iranian general, while Chinese Vice Premier Liu He is set to sign a Phase 1 deal in Washington next week. U.S. stocks, which hit record highs on Thursday, the S&P/ASX 200 index .AXJO added as much as 0.8% to touch an all-time peak of 6,926.7.
As of 0100 GMT, the index was up 0.6%, poised to log a weekly gain of 2.7% and its best performance since Feb. 2019.
Low global interest rates are the main reason why markets have had enough confidence to rise despite risks of potential flare-ups in geopolitical tensions, said James McGlew, executive director of corporate stockbroking at Argonaut.
Money from the rate cuts was now flowing into high-yielding stocks, allowing investors to overcome fears over a devastating season of bushfires in Australia, escalations with Iran and even the ongoing Sino-U.S. trade tussle, he said.
Financial stocks .AXFJ were the biggest drivers of gains, with the "Big Four" lenders rising between 0.7% and 1.1%. Among them, top lender Commonwealth Bank of Australia CBA.AX gained the most.
Insurance Australia Group IAG.AX , insurer Suncorp Group SUN.AX and QBE Insurance Group QBE.AX also posted robust gains, despite flagging a surge in bushfire-related claims in recent weeks.
Healthcare stocks .AXHJ also advanced, with the index's fourth-largest stock CSL CSL.AX adding 1.4% to boost the benchmark. Hearing aid maker Cochlear COH.AX gained 1.6%, while U.S.-based Resmed Inc RMD.N tacked on 1.2%.
Further supporting gains were miners BHP Group BHP.AX and Rio Tinto (LON:RIO) RIO.AX , the two biggest stocks in the index, which climbed 1.2% and 1.1%, respectively.
Putting a leash on gains was the gold index .AXGD that dropped 2.4%. Despite strong gains and soaring bullion prices across the week, the sub-index is set for a weekly drop of 0.9% and to snap third straight weekly gain.
The worst performer in the broader index, Evolution Mining EVN.AX tumbled 6.6% after the miner forecast gold production for fiscal 2020 at the bottom of its outlook range, following shallower levels of ore at its Mt Carlton operations.
nearby New Zealand, the benchmark S&P/NZX 50 index .NZ50 rose 0.2% or 25.16 points4 to 11,582.14.
The country's flag carrier Air New Zealand AIR.NZ added 1.9%, while dairy giant a2 Milk Co ATM.NZ rose 1%.