Gold rallied more than 2 percent to a four-month high on Friday as the dollar slumped against the euro, oil soared to a record high and equity markets floundered on renewed fears over the scope of the credit crisis. Spot gold was at $962.60/963.60 an ounce at 1404 GMT, up from $944.10/945.30 late in New York on Thursday.
Earlier it touched a session high of $967.60, its strongest since March 19. UBS analyst John Reade said oil, weakness in the dollar and issues with the agencies are all conspiring to drive gold higher.
A fresh jump in oil prices on Friday fuelled initial gains in gold. Oil climbed more than $5 a barrel as supply fears intensified in major oil producers Iran and Nigeria, and ahead of a strike of Brazilian oil workers next week.
Gold tends to move in line with crude, as it is often bought as a hedge against oil-led inflation. Strength in oil prices also boosts the appeal of commodities as an asset class.
The precious metal extended gains as the dollar slid to 2-1/2-month lows against the euro. Gold moves in the opposite direction to the dollar, as it is often bought as a currency hedge. The dollar weakened sharply against the euro on new fears over the health of the financial markets, as equities slipped on Wall Street and in Europe.
Investors are worried about the widening impact of the credit crisis on the financial sector and the outlook for government-backed mortgage buyers Fannie Mae and Freddie Mac.
Meanwhile platinum ticked up, benefiting from gold's rise, and as signs of firmer Chinese demand for the metal used in autocatalysts and ongoing supply fears linked to the South African supply shortage fuelled buying.
Spot platinum rose to $2,025.00/2,045.00 an ounce from $1,994.50/2,014.50 late in New York, having earlier hit a one-week high of $2,045.00 an ounce. Among other precious metals, spot palladium rose to $452.00/460.00 an ounce from $449.00/457.00 an ounce late in New York, while silver rose to $18.72/18.77 an ounce from $18.28/18.33 late in New York.