Gold rebounded on Monday to reach a new 25-year high and target the next big level of $600 an ounce, with funds and investors positive about the outlook.
"We are still well above the $580 level and it looks pretty good that we are going to get above $600 at some stage," said Michael Widmer, analyst at Macquarie Bank.
"The fund money is the main driver in the market and that has not changed since the cycle began."
Gold reached as high as $591.50 an ounce before ending New York trading at $588.10/589.00. That compared with $581.50/582.40 late on Friday, when it fell about $10.
Physical buyers and bargain-hunters were expected to help arrest any sharp drop in prices at the start of the new quarter, and last week''s profit-taking was interpreted as a healthy period of consolidation before further gains.
"We closed above key levels and that was a positive signal for the market," said James Moore, analyst at TheBullionDesk.com.
Investors were being drawn to precious metals by inflation concerns, speculation about purchases by central banks and worries about Iran''s nuclear programme, he said.
Iran said it would test fire a powerful torpedo on Monday and more missiles on Tuesday. Western countries have been watching moves with concern amid a stand-off over the Iranian nuclear programme, which the West says is aimed at building atomic bombs.
"The market continues to appear well-supported and we see the overall macroeconomic and geopolitical environment as favourable for gold," Barclays Capital said in a report.
Dealers said a rise to $592-$596 might prompt selling, while a drop to around $575-$582 would bring in fresh buyers.
"Although selling interest just in front of the $600-mark could be expected to momentarily impede progress higher, the overall sentiment remains positive," Standard Bank said.
High and volatile prices have hit physical demand. Turkish gold imports fell 56.8 percent to 36.2 tonnes in the first quarter of 2006 from the same period last year, while demand in India, the world''s top consumer, was expected to remain subdued.
Virtual Metals, a UK-based consultancy, said the gold market would swing to a surplus of 422 tonnes in 2006 from a deficit of 310 tonnes in 2005 if prices remained firm.
Silver recovered after falling from a new 22-year peak of $11.91 an ounce on Friday as investors remained convinced that a proposed exchange-traded fund would boost demand.
Silver rose to $11.80 an ounce before easing to $11.75/11.78, against $11.51/11.54 late on Friday.
Some analysts cautioned that prices might slip again.
"Once the tide turns, and it most likely will at some stage, it might get as nasty for the bulls as it is now for industrial end-users and for the few owners of short positions," said Wolfgang Wrzesniok-Rossbach, analyst at Germany''s Heraeus.
"It seems worthwhile to keep in mind that the white metal has shown in the past its ability to fall much faster than it normally rises," he said in a report.
Platinum increased to $1,074/1,078 an ounce from $1,060/1,065 in the US market on Friday, when it surged to a record high of $1,093.
Palladium rose to $337/341 an ounce from $331/335.