Gold rose to a new two-month high of $964.95 an ounce on Thursday as the dollar lost more ground against the euro, while silver hit a fresh 9-month peak. Spot gold was bid at $964.75 an ounce at 1533 GMT, against $948.10 an ounce late in New York on Wednesday. US gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose $11.20 to $964.50.
Silver hit a high of $15.25 an ounce, its firmest since August 2008, and was later at $15.24 an ounce against $14.72. "Platinum and palladium are following gold, silver is putting in a great performance above $15 and the euro is clearly up," said Gerry Schubert, head of precious metals at INTL Commodities.
"The weak long positions have been taken out of the gold market," he added. "What you see is good quality buying, and for the first time this month we are seeing physical buying out of Turkey and Middle East." The euro firmed against the dollar on Thursday, reversing earlier losses that saw the single currency touch a one-week low of $1.3793 earlier in the session. The US currency strengthened, however, against the yen.
The prospect of rising inflation in the longer term is also likely to support gold, a key hedge against rising prices. Investor demand for the metal remains relatively soft after the heavy buying seen in early 2009. Holdings of the main gold exchange-traded fund, the SPDR Gold Trust, were unchanged, albeit near record levels, for a third straight session.
Holdings of a much smaller ETF operated by Swiss bank Julius Baer are expected to rise to a record 1.599 million ounces by Friday, however. In India, the world's biggest bullion buyer, demand was firm despite high prices as the wedding season got underway. During the season, which lasts until June, parents give gold jewellery as a wedding gift for financial security.
Among other precious metals, platinum was quoted at $1,143.50 an ounce against $1,131.50 late in New York on Wednesday, while palladium was at $225 against $222. Platinum is being pressured by fears over the demand outlook, especially from the ailing auto sector, which typically consumes half of the world's annual output of the white metal.
General Motors made an improved equity exchange offer to bondholders with $27 billion in debt intended to pave the way for a quick bankruptcy process. Under the proposed deal, the US Treasury will hold 72.5 percent of the new GM coming out of a bankruptcy sale process. "GM seems set for bankruptcy and this is keeping investors cautious on platinum and palladium, hence the currently low platinum/gold ratio of 1.19," said UBS analyst John Reade in a note.