Gold rallied on Thursday to a five-month high of $654 an ounce as investors saw potential for it to scale new peaks on expectations of a weakening of the US dollar and stronger oil prices.
Other precious metals tracked gold, with silver jumping to a one-month high, platinum touching its highest in two months and palladium climbing as high as $352 an ounce, the highest in more than four-and-a-half months.
After several recent attempts, gold breached the $650 mark and analysts said that the currency and energy markets were expected to help gold to scale new highs going forward.
"Overall, we still have got a macro-economic picture that is relatively supportive for gold investors," said Michael Widmer, metals analyst at Calyon Corporate and Investment Bank. "You generally expect the US economy to slow down, a relatively healthy growth in the eurozone and a downward pressure on the dollar," he said.
"In such an environment, people might start to adjust their portfolio to put a little bit more gold in it and reduce the risk of being too exposed to a downcycle."
Gold hit $654 an ounce and was at $651.80/652.80 by 1520 GMT, against $647.20/648.20 late in New York on Wednesday. It has gained eight percent from early January, but is still 10 percent down from a 26-year high of $730 in May last year.
"A holistic picture of the market hints of a major rally in gold," Pradeep Unni, analyst at Dubai-based Vision Commodities Services, said, adding the metal was getting support from oil. Oil rose towards $56 a barrel, helped by cold weather in top consuming regions and by Washington's plan to increase reserves. Gold is generally seen as a hedge against oil-led inflation.
Strong metal prices have been prompting producers to take advantage of the situation, but some miners are struggling to maintain production and reserves targets. Gold Fields Ltd, the world's fourth biggest gold miner, launched a $1.2 billion capital raising and said it had spent $528 million to close out the 1 million ounce hedgebook of take-over target Western Areas.
Australia's Newcrest Mining Ltd cut its output and reserves forecasts for its flagship Telfer mine, while Aquarius Platinum Ltd said attributable production of platinum group metals fell 2.4 percent to 136,928 ounces in the three months to end December from the previous quarter. But Lonmin Plc, the world's third-largest platinum producer, posted a 10.9 percent rise in first-quarter production of platinum group metals.
In other metals, silver rose to 13.54 before easing to $13.43/13.50 an ounce, against New York's $13.18/13.25, while platinum was at $1,175/1,180 after rising to $1,180, against $1,164/1,169.
"While resistance ahead of $1,180 has proved strong, the metal remains within its short-term uptrend and should garner strength from further gains in gold and silver," James Moore, precious metals analyst at TheBullionDesk.com, said. Palladium was last quoted at $351/356 an ounce, compared with $344/349 in the US market.
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