Gold rallied to a new 25-year high near $700 an ounce on Tuesday on dollar weakness, while platinum set a new record on strong industrial demand and fund buying.
Other precious metals also gained from the bullish environment in commodities, which saw copper setting a new record and aluminium surging to an 18-year peak.
"We have a combination of overlaying sets of momentum here. More and more of genuine investors have become convinced that some portion of their assets should be put into the sector," said Sean Corrigan, chief investment strategist at Diapason Commodities Management.
"Clearly this is a very nervous market and we could suffer quite a serious shake out at any point."
Spot gold jumped as high as $697.00 an ounce, up 2.8 percent from $677.90/678.90 late in New York on Monday, before easing to $695.60/696.60 in later afternoon trade. It soared to an all-time high of $850 in 1980.
The dollar fell to a new eight-month low against the yen, making gold cheaper for holders of other currencies. Investors tend to put their money into commodities after a drop in other financial markets.
"It's a bullish picture across the commodities sector. The market will continue to move higher. The upside is still open," a precious metals trader in London said.
Dealers said gold was also supported by political tensions over Iran's nuclear ambitions, inflation worries and talk about China's gold reserves.
Some Chinese economists urged Beijing to quadruple its gold reserves to 2,500 tonnes from 600 tonnes because the country's foreign exchange reserves had become the world's largest, an official industry newspaper reported on Tuesday.
"Gold will continue to be seen as a safe bet as international tension look set to increase again while the dollar is set to remain under pressure," said James Moore, analyst at TheBullionDesk.com.
The market shrugged off news that gold reserves held by Eurosystem central banks fell by a net 916 million euros in the week ended May 5 after three central banks sold bullion.
The sale was consistent with the Central Bank Gold Agreement of 2004.
PLATINIUM LEAPS:
Platinum prices gained $45, or 3.8 percent, to reach $1,231/1,236, compared with $1,186/1,191 late in New York on Monday. The metal has jumped 28 percent this year along with other precious metals.
The rise by platinum was driven by robust demand for the metal from industries such as automobiles, glass and chemicals, Wolfgang Wrzesniok-Rossbach, head of precious metals marketing at Germany's Heraeus, said.
"The market seems well supported. In the long run this is going to change, but for the time being it's not the moment to fight the bulls," he said.
Platinum's major industrial use is in autocatalysts, particularly in diesel vehicles, as it helps cleanse environmentally damaging fumes from engine exhausts.
"We believe that platinum has a more fundamental underpin than gold, silver or palladium," said John Reade, precious metals analyst at UBS Investment Bank.
"While there is undoubtedly investor and speculative long positions in platinum, the market remains in a fundamental deficit and should remain so for the foreseeable future," he said in a daily report.
Investors were betting on platinum ahead of London's Platinum Week, which starts on May 15. Johnson Matthey, the world's top distributor of the metal, will release its widely read report during the week on market fundamentals and price trends.
In other precious metals, silver rose to $14.21/14.31 an ounce from $13.78/13.88 in New York. Palladium rose as high as $390 an ounce, the highest since February 2002, and was at $389/387, versus $370/375 in the US market.