Gold set record highs for a second straight session on Wednesday as dollar weakness and mounting worries about potential inflation polished the precious metal's appeal to investors. Spot gold hit a historic $1,048.20 an ounce, before easing to $1,040.50 an ounce by 1558 GMT, versus $1,040.85 quoted late in New York on Tuesday.
US December gold futures hit a new peak of $1,049.70 an ounce. Gains were clipped as the dollar arrested its slide versus a basket of currencies, while strong chart-based resistance at $1,050 per ounce also weighed. Other precious metals basked in gold's glow with palladium hitting $313.50 an ounce, its highest since August 2008 while platinum rose to a two-week high and silver to a three-week high.
Analysts said momentum was set to remain broadly in the market's favour. "When the market moves this much in the space of two days, you have to expect it to pause for breath. But we don't see too many signs of people looking to bail out and take profits here," said Tom Kendall, metals analyst at Mitsubishi Corp in London.
Bullion has gained nearly 20 percent this year, helped by dollar weakness and on the back of escalating inflation worries after central banks and governments across the globe poured billions of dollars into the financial system to revive growth. Daniel Sacks, Co-Portfolio Manager of the Investec Global Gold Fund, said gold prices were set to test new highs as the fourth quarter progresses.
Metals consultancy GFMS has put the inflation-adjusted peak for gold as high as $2,079 an ounce. Gold's rally has boosted flows into exchange traded funds (ETF). The world's largest gold-backed ETF, the SPDR Gold Trust, said its holdings stood at 1,100.514 tonnes as of October 6, up 0.2 percent or 2.441 tonnes from the previous business day for the third consecutive day of increase.
ETF Securities' said its total gold holdings now stand at 8.3 million ounces, up 110 percent over the past two years. Silver rose to $17.55 an ounce, its highest since September 17, and was last at $17.41 an ounce versus $17.32 an ounce last quoted in New York on Tuesday. Platinum climbed to $1,338 an ounce, its highest since September 23 and was last at $1,319.00 an ounce from $1,313.50 an ounce. Palladium was at $312.00 an ounce versus $305.50.