US benchmark gold futures closed at a 17-year high on Friday as robust demand for bullion and jitters over inflation and the US economy stoked a buying spree in the precious commodity for a second straight day.
December delivery gold on the New York Mercantile Exchange's COMEX division climbed $4 to end at $463.30 an ounce. The session high at $464 was the loftiest level for a most-active futures contract in New York gold since June 1988.
Gold's rally this week has added $10, or 3 percent, to the December gold contract.
Prices extended gains after first hitting a 17-year peak on Thursday as money from investment funds and independent traders continued to flow into the market, traders and analysts said.
"The inflation signals are getting to be stronger and stronger and that's what is attracting the buying," said Frank Aburto, a broker at Rosenthal-Collins Group in New York. "And it is not over yet."
Gold, seen as a classic hedge against inflation and economic uncertainty, has benefited from record crude oil and gasoline prices and doubts about US economic strength and the dollar, especially after the destruction wrought by Hurricane Katrina along the US Gulf Coast.
With gold's move on Thursday, December futures eclipsed the 16-year high of $458.70, set last December by the then-benchmark February contract.
Now a number of traders were awaiting a break above the key $471 level, which was the high in the COMEX spot month from last December.
"I'm bullish and I think it's going to go much higher - another $15 to maybe $475," said a dealer at a New York precious metals desk.
A US government report showed the current account deficit narrowed in the second quarter to $197.7 billion, although the previous quarter's gap was revised higher.
Economists warn that the deficits at above 6 percent of gross domestic product represent a serious imbalance in the US economy, reflecting high levels of US consumption but an extremely low savings rate.
Precious metals consultant CPM Group said Friday that gold and also rising platinum have further upside in the short term, but they may be nearing longer-term peaks.
Factors including more mine supply and less jewellery demand at higher prices plus rising interest rates in the United States affecting investment demand, could combine to put a ceiling on the gold price, it added.
CPM said that although a spike above $470 may be possible, it likely was not sustainable due to market fundamentals.
The market also was in the rare position of breaking up its close inverse relationship with the dollar as the US currency barely budged in the last two days while gold surged.
Bullion likewise jumped to a 17-year high Friday, reaching $460.10 an ounce. It last traded at $459.40/460.10 in New York, from $455.10/5.80 late on Thursday. Friday's afternoon London fix was $457.20.
As gold was breaking out in a range of currencies, the metal priced in euros made a new all-time high Friday, reaching above 376 per euro.
In other precious metals, silver, platinum and palladium prices all shot to one-month highs, buoyed by gold. December silver futures rose 21 cents to end at $7.288 an ounce, after trading from $7.07 to $7.32. Spot silver changed hands at $7.22/25 vs. $7.01/04 previously. It fixed at $7.08.
On the board at NYMEX, October platinum peaked at $927 an ounce and last was at $923.80 for a gain of $4.10. Spot platinum rose to $918/921.
December palladium jumped $6.30 to close at $193.45 an ounce. Spot palladium was worth $190/193.