Gold climbed to a 28-year peak above $780 an ounce on Friday and platinum matched an all-time high, as a record low dollar and lifetime-high oil spurred bullion buying.
Gold, often seen as a hedge against oil-led inflation and traditionally deemed a safe-haven asset, was gradually advancing towards the next big target of $800 an ounce while the dollar struggled to find a solid base.
A series of disappointing US economic data has fuelled near-universal expectations that the US Federal Reserve will cut interest rates by at least 25 basis points at its meeting next week - a negative factor for the dollar and good for gold.
"The deteriorating economic picture is manifesting itself in a weaker dollar and that's helping gold. Oil is also looking strong. We are getting close enough to $800," said John Reade, head of metals strategy at UBS Investment Bank. "The danger of a correction is still there but you are going to need a trigger for it," he said.
Spot gold hit a high of $780.60 an ounce, the highest since January 1980 when it rose to an all-time high of $850. It was quoted at $778.90/779.40 by 1406 GMT, against $767.90/768.70 late in New York on Thursday. The metal has surged 23 percent this year.
The dollar fell to fresh record lows against the euro and a basket of currencies, while oil shot up to record highs on heightened tension between the United States and Iran and on worries over energy supply shortages. A weaker dollar makes gold cheaper for other currency holders and lifts demand.
The metal also attracts investors from the currency market in the event of a cut in interest rates. "The relationship of the dollar to gold is non-linear whereby if the dollar is weak and it weakens a little bit more, we have even bigger impact on the gold price," said Michael Lewis, global head of commodities research at Deutsche Bank. "We feel that we will be getting new highs in gold. Also the interest rate environment for gold is pretty positive."
"Rising crude oil prices on fears of interruptions of supply from the Middle East are another supportive factor for gold," Dresdner Kleinwort said in a daily report, adding the political tension in the Middle East might lead to higher oil prices and further increase gold's appeal as a safe haven.
The United States slapped new sanctions on Iran and accused its Revolutionary Guard of spreading weapons of mass destruction. Also, President Abdullah Gul warned Kurdish rebels on Thursday that Turkey's patience was running out after Turkish forces said they had repelled a guerrilla attack. Money also continued to flow into exchange-traded gold funds. The latest data showed that volume in StreetTRACKS gold ETF rose 20 tonnes in the past month to a record high of 597.53 tonnes.
Analysts said a liquidity boom, fuelled by lower US interest rates and a flight from asset-backed commercial paper has sparked a rally in the oil and commodity markets.
In other bullion markets, the benchmark August 2008 gold futures contract in Tokyo rose 56 yen a gram, or 2 percent, to 2,879 yen, while the most-active December US gold futures rose $11.50 an ounce to a high of $782.50. Platinum tracked gold, with supply worries supporting the metal, used to clean vehicle exhaust fumes and make jewellery. Spot platinum rose as high as $1,454/1,458 an ounce, matching last week's record high of $1,454, against $1,443/1,448 late in New York.
A mineshaft remained shut at South Africa's Impala Platinum, the world's second biggest producer of platinum, after a fatal accident earlier in the week. Silver climbed to an eight month high of $14.18 an ounce before easing to $14.13/14.18, against $13.86/13.91 in the US market. Palladium rose to $369/373 from $362/366.
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