Gold surged to a record high above $1,100 per ounce on Friday as investors pounced on the metal in volatile trade after data showed US employers cut a bigger-than-expected 190,000 jobs in October. Dealers also said the market continued to find residual support from the prospect of central bank buying of gold to diversify their reserves.
"The market has the bit between their teeth - all these investors have piled into gold in a quasi-physical sense and now they are being supported in that by the actions of Mr Central Bank," said RBS metals analyst Stephen Briggs. The precious metal hit a record high at $1,100.90 per ounce earlier, having gained more than 25 percent this year.
By 1514 GMT, it was bid at $1,097 a troy ounce from $1,089.55 late in New York on Thursday. The trigger for the surge this week was news that the International Monetary Fund had sold 200 tonnes of gold to the Reserve Bank of India for $6.7 billion.
"People are focusing on pent up demand for gold from central banks in emerging markets," said Michael Lewis, head of commodities research at Deutsche Bank. Gold rallied $25 on Tuesday, largely driven by India's purchase of gold from the IMF, which soothed investor nerves about possible oversupply. "Most central banks outside of the US and Europe have low gold reserve ratios," Calyon said in a note.
"Those central banks with low reserve ratios and are keen to diversify into gold, notably those located in Asia, will be potential candidates to buy the remainder of the IMF's 203.3 tonnes of gold in an off-market purchase." The high chances of Asian central bank gold purchases were reinforced by Sri Lanka, which said on Thursday it had been buying gold for the last five or six months.
However, some think Asian central banks may not hurry to follow India's lead given current record prices and the availability of cheaper domestically produced gold. "Indian buying was very significant, but those getting excited about the potential for copy cat moves need to consider a number of factors," said David Thurtell, analyst at Citi.
The central bank story has offset some selling by investors as seen in the world's largest gold-backed exchange-traded fund, SPDR Gold Trust. SPDR's holdings fell 0.055 tonnes to 1,108.344 tonnes on Thursday, marking the first decline since October 30. Silver was bid at $17.48 from $17.37 late on Thursday, platinum at $1,349 from $1,353.50 and palladium at $329.50 from $328.50.