Gold on Wednesday hit its highest since early March and silver struck a 31-year peak as investors sheltered in precious metals from weak data, Middle East unrest and a key vote threatening Portugal's government. Spot gold was bid at $1,439.44 a troy ounce at 1507 GMT from $1,429.50 late in New York on Tuesday. The precious metal hit a session high of $1,440.90, its highest since March 7 when it scored a record peak of $1,444.40 an ounce.
Tracking bullion, spot silver hit a session high of $36.85 an ounce, its highest since 1980. "As long as we still have all this uncertainty it lends good support to the gold story," Saxo Bank senior manager Ole Hansen said as oil prices stayed high, fighting in Libya escalated and unrest simmered across the Middle East.
Weak economic data boosted investors' flight to gold as a safe haven from risk. Figures showed new US single-family home sales unexpectedly fell in February to hit a record low and that eurozone consumer confidence declined in March. The latest flurry of gold purchases was also bolstered by the expectation Portugal's parliament would reject the government's latest austerity measures, setting the stage for the possible collapse of the minority Socialist administration ahead of a European summit.
Also hitting risk appetite, European Union leaders are set to delay a decision on how to strengthen their multi-billion euro rescue fund beyond the summit this week. "Today there is focus on Portugal. There are debt problems more generally in the western world and of course we should not forget the Middle East, which also leads to safe-haven flows," said Christin Tuxen, analyst at Danske Bank.
"Longer term, the fact that interest rates are on the rise generally will make the opportunity cost of investing in gold higher, making it less attractive." Conflict in the Middle East has helped gold market sentiment and boosted oil prices because of worries about supply disruptions in the region.
Gold is used as a hedge against inflationary pressures, often triggered by rising oil prices. Brent crude oil dipped slightly but, at $115 a barrel, was nearing recent 2-1/2 year highs of around $120. Forecasts of stronger industrial demand have helped silver prices climb. Spot silver was bid at $36.81 an ounce from $36.34 late on Tuesday.
"While many market participants are impressed by silver's industrial and retail demand, and are concerned about physical shortages, another portion believe there is too much speculative noise in the market right now," UBS said in a note. Platinum was bid at $1,745.5 an ounce from $1,732.00 and palladium at $738.65 from $733.00. Both platinum and palladium are used in autocatalysts and have come under pressure since Japan's March 11 earthquake and tsunami shut car factories in Japan.
Toyota Motor Co has halted operations at its 12 main assembly plants in Japan until at least Saturday, which will result in lost production of 140,000 vehicles. "Japan accounted for 15 percent of global platinum consumption last year, and demand in the short term will be weaker following the closure of industry after the earthquake/tsunami," Credit Agricole said in a note.
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