Gold rose for a tenth straight session on Friday, matching a record winning streak set four decades ago, as fears over debt talks aimed at averting a US government defaullt fuelled the precious metal Safe-haven buying increased after President Barack Obama and Republicans traded demands for a serious deficit plan, underscoring a lack of progress plaguing negotiations to raise the US debt limit.
Gains in crude oil, a plunge in US consumer confidence and concerns about eurozone debt contagion also underpinned the metal. "The longer the debt talk drags on, the more you would want to own a safe haven like gold. The crude oil market is also rallying quite nicely, and that's a big element in support for gold," said James Steel, chief commodity analyst at HSBC.
Analysts forecast gold would extend its rally further based on its technical outlook, and one said it could reach an outlandish $5,000 an ounce should equity markets plunge. Spot gold was up 0.2 percent at $1,589.89 an ounce by 12:00 pm EDT (1600 GMT). It failed to hit a new peak after rallying to all-time highs in the previous two sessions, but stayed near the record of $1,594.16 hit on Thursday.
US gold futures for August delivery added $1.80 an ounce at $1,589.89. Spot silver gained 2 percent to $38.96 an ounce, near a two-month high of $39.34 set on Thursday. Bullion prices held onto small gains after an industry health check aimed at reviving investor confidence showed that eight European banks are not strong enough to withstand a prolonged recession and need to raise 2.5 billion euros in capital.
Gold's gains appear limited after US Federal Reserve Chairman Ben Bernanke said on Thursday the central bank is prepared to act if the recovery falters, but made clear the Fed was not at that point. A Reuters poll this week showed analysts expect gold prices to average $1,550 an ounce in 2012.
Gold could rise to anywhere between $1,870 and $5,000, with the top end of the forecast based on bullion's relative strength to the Dow Jones industrial average if there were another shock similar to the Great Depression, research firm Capital Economics said in a note.
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