Tokyo gold futures rose by the daily price limit of 60 yen per gram on Friday, boosted by global tension, record-high oil prices and the currency market, where the yen slid against the dollar after the Bank of Japan raised interest rates.
The benchmark June 2007 gold contract on the Tokyo Commodity Exchange surged as much as 60 yen to 2,497 yen per gram, the highest for TOCOM's key contract since May 18. At the close, it was up 54 yen or 2.2 percent at 2,491 yen.
TOCOM will be closed on Monday for a public holiday and will resume trade on Tuesday.
TOCOM gold stretched a rally for the fourth straight day on Friday, gaining 6.5 percent from the beginning of this week, as safe-haven buying of gold accelerated amid escalating fighting between Israel and Hizbollah guerrillas in Lebanon, tensions over Iran's nuclear programme and deadly bombings in India.
The market extended gains late on Friday as the yen slipped back towards a two-week low against the dollar after the Bank of Japan said interest rates can be kept low for some time. That comment followed a widely expected increase from zero, the first in six years.
"The market is ripe for profit-taking after posting steep gains this week, but a sharp correction is unlikely to occur," a Tokyo broker said, adding that bargain-hunting interest from investors would be strong and support TOCOM prices.
Technically, TOCOM's benchmark gold is poised to test a 20-year high set in May at 2,587 yen after breaking through the 2,370-yen area this week, he added.
Spot gold was quoted at $660.25/1.25 an ounce at 0700 GMT, up from $654.70/656.20 in late New York on Thursday.
Gold was also bought by investors as a hedge against inflation, as oil surged to record highs above $78 on Friday on heightened conflict between Israel and Lebanon and fresh supply fears in major oil exporter Nigeria.
The dollar rose above 116 yen in late Tokyo trade on Friday, creeping back towards a two-week high of 116.12 yen.
The BOJ voted unanimously to lift overnight rates to 0.25 percent, ending an era of zero rates aimed at pulling the economy out of its decade-long stagnation and fighting off deflation.
But with rates in the United States and the euro zone towering much higher at 5.25 percent and 2.75 percent respectively, traders and analysts said the BOJ's policy shift was unlikely to spur much of a yen rally just yet.
In the platinum market, TOCOM's benchmark June 2007 contract closed down 16 yen per gram at 4,519 yen.
Earlier in the day, the contract rose as high as 4,570 yen, chasing the rally in gold futures. But prices turned negative, pressured by profit-taking ahead of the three-day weekend.
Tumbling share prices have also raised concerns about the global economy and demand for industrial metals, denting prices of platinum, which is mainly used for jewellery and automobile emission control systems.
Spot platinum was quoted at $1,247/1,252 an ounce at 0700 GMT, down from $1,249/1,255 in late New York.
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