Gold hovered near recent highs in Europe on Friday as inflation worries due to firm crude oil prices kept investors biting, although the market lacked the momentum so far to crack the $475 an ounce barrier again.
Silver was buoyant, scoring its highest since early June and now looking to take out the high for the year above $7.60.
Gold prices hit their firmest since January 1988 at $475 last week before succumbing to profit-taking. Many traders and analysts were now looking for bullion to target $480.
Spot gold was at $471.90/472.60 by 1450 GMT, little changed from $472.40/473.20 last quoted in New York overnight. Gold touched $474.25 in early European trading.
"I wouldn't be surprised to see us breaking through to a new 17-and-a-half year high next week, testing the $475 level," said Ross Norman of the TheBullionDesk.com.
A weak US currency makes dollar-priced gold cheaper for holders of other currencies, lifting demand for the metal.
The dollar recovered to trade flat against the euro on Friday after a higher-than-expected reading of the US August core PCE price index, the Federal Reserve's favoured measure of inflation.
That might suggest the Fed would continue its gradual campaign to raise interest rates in order to contain price pressures.
"The month-end and quarter-end could lead to a bit of window dressing from some of the investors and speculators who are long in gold," John Reade, UBS Investment Bank analyst, said. "Hence the reason why we are expecting the metals to do rather well in the next 24 hours."
Fund managers were active in the market as high crude oil prices were seen stoking inflation fears. Gold is generally considered a hedge against inflation.
Crude oil prices held above $66 a barrel as outages at hurricane-battered US refineries and strike-hit French plants further tightened winter fuel supplies.
Gold might even try to test the psychological level of $500 - unseen since 1987 - in the next few months as an every wider array of investors entered the market.
People prefer to invest in safe-haven gold in uncertain times.
"The outlook for gold likely remains strong on complementary factors of inflationary concerns, economic worries, strong physical demand and unusually strong fund buying interest at current high prices," Standard Bank said in a report.
Silver touched $7.56 an ounce, its firmest since early June, on the back of gold's rally and also aided by copper prices near all-time highs. "The year's high of $7.60 is perhaps within sight despite daily charts showing silver overbought," Julia Hamblett of Dresdner Kleinwort Wasserstein said in a daily note.
Silver has twice moved to around $7.60 this year but has retreated each time. Spot was quoted at $7.53/7.56 from $7.49/7.52 last quoted in New York on Thursday.
Platinum was at $928/932, from $924/929. Palladium was slightly down at $194/197 from $196/200.
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