Gold spiked to a new 25-year high on Friday after the UN nuclear watchdog said Iran had ignored a UN Security Council call to suspend nuclear fuel enrichment. Silver also jumped by eight percent, with both metals getting an extra boost from the dollar's plunge against the euro.
"As long as uncertainty persists over the eventual resolution of the Iranian conflict, gold is going to continue to get support," a UK-based precious metals analyst said.
Spot gold rose as high as $652.80 an ounce before easing to $648.90/649.90 by 1547 GMT, against $634.20/635.20 late in New York. The dollar fell against the euro to its lowest since May 2005 as concerns over large deficits after last weekend's meeting of Group of Seven finance chiefs continued to dog the US currency.
A weak dollar makes safe-haven gold cheaper for holders of other currencies and boosts demand.
The dollar came under further pressure after the International Atomic Energy Agency reported Iran had ignored a call to halt nuclear activities and accelerated the programme. Gold also saw volatile trade on Thursday, when it touched a low of $627.20 an ounce after China raised interest rates. It later regained some ground after the dollar dropped.
"There has been some covering ahead of the weekend - people are looking to get their positions squared," one trader said. With most of Asia and Europe closed Monday for May Day and other holidays, "traders are likely to be reluctant to go home short given the current geo-political picture," James Moore of TheBullionDesk.com said.
"Going into a long weekend holiday in Europe, volatility is likely to remain a key feature, as Iran says it does not `give a damn' about the UN resolution," Dresdner Kleinwort Wasserstein said in a report. Most of Europe celebrates the May Day holiday. Silver soared after the launch of the first silver exchange-traded fund, which is expected to boost demand of physical bullion.
Silver was at $13.38/13.48 an ounce after jumping to $13.63, compared with $12.61/12.71 in New York, but still well below a 23-year peak of $14.68 hit last week. Barclays Global Investors' ETF, called iShares Silver Trust, with the trading symbol SLV, began trading on the American Stock Exchange on Friday.
ETFs are designed to closely reflect the price of an underlying market or commodity, such as a stock index or gold. They trade like listed stocks.
Platinum rose to a record high of $1,148/1,153 an ounce from $1,136/1,140 late in New York. Palladium was at $364/369 an ounce, compared with $359/363.
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