Gold rose to as high as $505 an ounce in Asia on Friday, its best level since February 1983, and was likely to rise further as fund buying resurfaced despite fears of year-end liquidation.
Spot gold was quoted at $503.65/504.15 an ounce, up slightly from $503.00/503.75 last quoted in New York on Thursday. Gold climbed to $509.20 an ounce in February 1983.
Anything above that level will bring the metal to its highest since January 1980, when it hit a record high of $850 an ounce. "Where do we go from here? I guess if we stay above $500, we may well be targeting $510," said Darren Heathcote, head of trading at N M Rothschild in Sydney.
"The funds are still happily buying, they are still happily holding gold at the moment. But I suspect the longs are still very overbought susceptible to a downturn," he said.
The spot market was also driven by gains in Tokyo, where benchmark October gold futures on the Tokyo Commodity Exchange rose by the daily 50-yen limit to a 15-year high of 1,974 yen per gram on a weak yen.
Gold, used as jewellery and investment, has been on the rise as investors diversified their portfolios on worries about geopolitical tensions, such as the threat of terrorist attacks, and inflation.
The World Gold Council has said global demand for gold in the third quarter totalled 838 tonnes, a rise of 7 percent from the same quarter a year, with surging investment demand helping to offset a slowdown from the jewellery sector. Trading has been volatile since gold breached the $500 level for the first time since 1987 this week, falling to a one-week low of around $490 on Thursday as investors booked profits.
The latest weekly Commitments of Traders report issued by the Commodity Futures Trading Commission on Monday showed that speculative net long position in New York's Comex gold were close to record high levels. Platinum group metals also rose and silver hit it's highest since 1987 at $8.52 an ounce. Platinum rose to $995/999 an ounce from $987/992 late in New York. Sister metal palladium rose to $263/267 an ounce from $261/264. Silver edged up to $8.52/8.54 an ounce from $8.51/8.53 late in New York.