COMEX gold closed firmer and stretched its rally to a fresh 5-1/2-month high Friday, but lost momentum as the embattled dollar found its footing and crude oil stayed under $50 a barrel.
However, after gold futures trading ended, oil futures on the New York Mercantile Exchange closed above $50 for the first time ever.
Quarter-end book squaring ran its course on Thursday, when gold rose sharply. Dealers said gold could afford a pause after rallying more than 6 percent in the last three weeks.
"We're into a new quarter, so a lot of the markets have been certainly quieter today than they've been for the last two or three days. Even with the fund activity yesterday, its been quieter by comparison," said Bernard Hunter, a director at bullion dealer Scotia Mocatta in Toronto.
COMEX December gold ended up 80 cents at $421.20. It peaked at $421.90 overnight, its highest price since April 13, when gold was near 16-year highs, before slipping to $418.50.
Sources reported gold buying from Hong Kong and Switzerland overnight, on the heels of a fund purchase of more than 1 million ounces worth on Thursday.
Dealer took in stride early afternoon comments from Canada's finance minister Ralph Goodale that Canada opposed a plan to be discussed at weekend International Monetary Fund/World Banks talks in Washington to revalue the IMF gold reserves to finance poor nation debt forgiveness.
"The whole concept of IMF revaluation I guess has been in the back of people's minds for some time. It's not like it's a startling revelation," Hunter said. "If they were to do something there might be small reaction one way or other, then they would just get back to focusing on the dollar." The euro slipped to $1.2400/05, but remained near the 2-1/2 month high hit Thursday at $1.2444.
Oil stalled, though it rose back to $50 after gold closed. Investors remain interested in gold as a safe alternative investment, given uncertainty before the US elections, the threat of al Qaeda attacks and increasing turmoil in Iraq.
Plus physical demand has stayed robust above $400 an ounce. Top-consumer India is entering the festival season of peak demand and in the Middle East high oil prices have created wealth that is finding its way into gold bar investments.
Spot gold rose to $418.85/9.60 from $417.70/8.50 late Thursday. London's afternoon fix was $418.10.
"Despite the threat that some of yesterday's moves were month/quarter end manipulation, the market seems in general happy to test higher, with the combination of dollar weakness, geopolitical tensions and high oil prices all indicating a test to $425 and potentially the year's high of $432," wrote analyst James Moore at TheBullionDesk.com.
December silver went up 0.5 cent to $6.943 an ounce, trading from $6.88 to $7.00, its best level since August 20.
Spot silver fetched $6.89/92, up from $6.88/91. The fix was at $6.84. January platinum slipped $1.10 to $860.40 an ounce. Spot was at $858/862.
December palladium fell $1.95 to $222.80 an ounce. Spot palladium traded at $218.50/223.50.