Gold rose slightly early on Monday, hitting record highs for a third consecutive day as funds kept buying the metal on a weaker dollar and a report showing US homebuilder sentiment stayed in the doldrums Traders said the market was focused on the Federal Reserve's policy meeting this week. Economists do not expect the Fed to announce any new measures to stimulate the economy on Tuesday when the policy meeting concludes.
But economists also believe the central bank may opt to make major repurchases of US government debt later this year if the economic recovery falters. Any such moves could fuel inflation fears and boost gold prices further. "Everyone's on the surfboard riding the wave. It's definitely the funds. We would never be seeing a run-up like this if it were not the big money behind it," said Miguel Perez-Santalla, vice president of sales at New York-based Heraeus Precious Metals Management. Spot gold hit a record $1,283.70 an ounce. It rose to $1,277.75 an ounce at 12:35 pm (1635 GMT), against $1,275.95 late in New York on Friday. US gold futures for December delivery climbed to $2.50 to $1,280 an ounce.
In recent years, many prominent hedge fund managers led by George Soros and John Paulson turned to bullion, fuelling its 17 percent rally year to date, sharply higher than the S&P 500 stock index, which is up less than 2 percent so far this year.
But last week, Soros renewed a warning that gold is the "ultimate bubble" and "it's certainly not safe and won't last forever." Holdings of the world's largest silver-backed ETF, the iShares Silver Trust, also rose on Friday, by 38.05 tonnes to 9,381.74 tonnes.
Silver prices, which have risen by 17 percent in the last five weeks alone, were flat on Monday, less than 1.5 percent below their highest level in nearly 30 years. Spot silver was trading at $20.74 an ounce against $20.76 late on Friday. During Monday's session, silver rose as high as $20.96 an ounce, after reaching $20.99 on Friday, its highest in the past 2-1/2 years.
The platinum group metals rose in line with gold. Platinum hit its highest in four months at $1,631.50 an ounce, and climbed 1.1 percent to $1,628 an ounce against $1,610.55 on Friday. Palladium inched down to $537.50 against $539.88.
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