Gold was set for its biggest one-week rise since late 2008 on Friday after a raft of soft economic data battered stock markets, though prices eased from record highs as equity markets and the euro edged off lows in afternoon trade. The metal rallied nearly 3 percent earlier in the day to a record $1,877 an ounce as investors sought refuge from a second day of hefty losses on the stock markets, hurt by deepening concerns over slowing economic growth.
Spot gold was up 1.7 percent at $1,853.89 an ounce at 1341 GMT. It is on track for its biggest one-month rise in nearly 12 years in August and is up 31 percent so far this year. However, it has retraced from earlier record highs as European shares lifted from lows and the euro recovered some lost ground. "Any time in the current environment you just need a little positive news (for the) market to retrace quite a bit, before stabilising and resuming its uptrend," said Credit Suisse analyst Tobias Merath. "There is clearly a stable uptrend over many, many months."
A raft of weak economic data this week has sparked heavy selling of equities and cyclical assets such as industrial commodities. European shares extended losses on Friday after posting their biggest one-day fall since Mar. 2009 on Thursday. "At the moment the market is just looking for relative safe havens," said Mitsui Precious Metals analyst David Jollie. "You can see that in the sell-offs across equity markets overnight. The strength of gold is the other side of the coin from that."
Most raw materials also fell. US crude prices were down in choppy trade, while base metals also declined. The euro recovered early losses, gaining momentum on stop-loss selling, but remained at risk of coming under renewed pressure from a darkening global economic outlook and worries the eurozone banking sector could face more funding pressures.
Speculation was also rife on Friday that the CME Group, the world's largest commodity exchange, could raise margins on gold futures once more, after a similar move earlier this month dampened the precious metal's sharp run higher. "Should gold see a repeat of last week's volatility, conjecture about another CME margin hike is likely to build, amplifying moves further," Swiss bank UBS said in a note.
Gold's surge was broad-based, with the precious metal hitting record highs in dollars, sterling, euros, yen and, for the first time since mid-2010, Swiss francs. Gold prices have rallied sharply in the safe-haven franc since the Swiss National Bank announced fresh measures to counter strength in the currency on Aug. 10.
It held close to its record even as the franc rose, benefiting from demand for currencies perceived to offer a safe haven. Its gains were capped by ongoing speculation Swiss authorities will again step in to curb the currency's strength. The latest gold rally came as fresh fund buyers were attracted to the market, analysts said.
The world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, said on Thursday its holdings rose by nearly 15 tonnes from the day before. Other precious metals also broadly benefited from gold's rise, with platinum rising to its highest since early May, up 1.4 percent at $1,861.49 an ounce, and silver climbing 3.3 percent to $41.91.
Gold once again traded briefly at a premium to platinum, after doing so last week for the first time since 2008. Concerns over economic growth, while lifting gold, are weighing on industrial metals liked platinum. "With the economic outlook deteriorating we would not be surprised to see downward pressure on prices emerge," said ScotiaMocatta in a monthly report. Palladium, meanwhile, bucked the trend for gains, easing 0.4 percent to $748.97 an ounce.
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