Gold came to within $2 of its highest level in just over 17 years on Thursday in Europe as speculative funds continued to buy despite a stronger dollar, and traders looked for new peaks. Gold was also firm in other currencies - scoring a new all-time high in euros above 372.
By 1515 GMT, spot gold slipped back to $453.80/454.50 a troy ounce, off its new 2005 peak of $455.10 but well up on New York's late quote on Wednesday of $449.50/450.20.
"This is a great performance," one trader said. "I guess the GFMS report was encouraging."
He was referring to a survey released by industry consultants GFMS on Wednesday that showed buoyant physical demand in the first half of 2005 and forecast gold prices to reach $480 before the end of the year.
New York gold futures scaled a 17-year peak at $459 an ounce on Thursday as concerns about inflation and US economic growth attracted safe-haven buying in the precious metal.
Traders said a large fund that had sold aggressively at the end of last month was back in the market buying again.
Analysts also noted that gold equities had firmed over the past day, while exchange-traded gold funds have also seen inflows.
"Given the current mood of the market and continuing uncertainty about US rates to deter much selling, we will not be surprised to see gold testing even higher in the near term," Barclays Capital said in a daily report.
"Encouragingly, the steep fall in the euro this morning towards its lowest level this month is having no discernable impact on gold, which is telling of the improvement in market sentiment lately."
Dollar-denominated gold tends to fall when the US currency firms as it becomes more expensive to overseas investors.
The dollar extended gains on Thursday after a reading of manufacturing in New York State reinforced the currency market's expectations the Fed will raise interest rates on Tuesday.
High oil prices were also seen as supportive for gold.
Some remained wary of the hefty net long position that speculators were holding on the New York gold futures market.
Analysts also cautioned that central bank selling in Europe would pick up again next month as the second year of a five-year pact to limit gold sales commences.
"Positioning points to a very long gold market, however, and this, together with the imminent resumption of central bank gold sales under the European Central Bank Gold Agreement...make us believe that gold could run into some selling pressure in the near term," John Reade, precious metals analyst with UBS Investment Bank, said.
He retained his positive stance for gold in the medium to longer term though.
In other metals, silver was holding above $7.00, with spot quoted at $7.02/7.04, up from $6.98/7.01.
Platinum has conclusively cleared $900.00, signalling further advances. Prices rose to $916.00/920.00, against a previous $911.00/915.00, while palladium gained to $184.00/186.00 from $182.00/184.00.