The gold futures in New York posted their highest close in six weeks on Thursday, as international tensions and record high oil prices encouraged flows into safe-haven assets.
Investment buying bolstered gains from this week's gold spike above $650 an ounce, and despite fits of profit-taking and selling due to a firm US dollar, the market extended gains after the close.
August delivery gold at the New York Mercantile Exchange's COMEX division settled up $3.20 or 0.5 percent at $654.40 an ounce, after trading from $646 to $656.50.
Gold futures on Wednesday hit a session high of $657, a peak since late May, but Thursday's close was higher than that on a settlement basis.
"Traders seem happy using rallies to lock in profits, however, given the rather unstable political picture globally further safe-haven driven price spikes cannot be ruled out," James Moore, an analyst with TheBullionDesk, said in a note.
After the close in off-hours electronic trade, gold was up a further $3.60 at $658 on follow-through speculative buying.
Gold and safe havens like government bonds and the Swiss franc have climbed amid escalating fighting between Israel and Hizbollah guerrillas in Lebanon and after the collapse of talks between South Korea and North Korea over a missile crisis, and tensions over Iran's nuclear program.
The UN Security Council set an urgent meeting for Friday after Israel launched a wave of military attacks on Lebanon. Hizbollah fighters rained rockets on northern Israel in their heaviest bombardment in a decade.
Gold initially shot up this week after a series of bombs hit railway carriages in India's financial hub Mumbai on Tuesday, killing about 180 people and wounding 700. Investigations continued in Mumbai on Thursday.
Traders said gold resistance loomed above $657 and then at $665, and all the way up to May's 26-year high above $730. Technical support was at $640, $610 and $600, they noted.
The euro was slightly lower against the dollar at $1.2686 at mid afternoon. A higher dollar usually pressures dollar-denominated gold as it becomes costlier to traders overseas.
US oil futures reached an all-time high of $76 a barrel. Gold often benefits as a hedge against inflation when energy prices are rising. Spot gold advanced to $654.70/656.20 an ounce late in US activity, versus Wednesday's New York quote at $647.80/9.30. Thursday's late London bullion fix hit $649.50.
"The recent surge in prices could come under some corrective pressure, once the immediate reaction to the security worries wanes," said Standard Bank in a daily note. In bullion, "immediate support should hold around $632 with further support likely at $620," it added.