Gold powered to an all-time high above $1,400 an ounce on Monday, extending its record-breaking rally to a third day, as safe-haven buying prompted by renewed budget problems in Ireland more than offset a sharp dollar bounce.
Gold has risen almost 6 percent since just before the Federal Reserve detailed its plans last Wednesday to buy $600 billion worth of Treasuries to revive the economy, but the Fed's actions also stoked inflation fears. Palladium rose 3 percent to break above $700 an ounce for the first time since April 2001, and silver also gained 3 percent to its third consecutive 30-year high on the back of speculative buying after gold's midday rally.
On Monday, market anxiety was focused mainly on Ireland. Although the government is funded until early 2011, a report questioned its ability to cut spending next year, casting doubt on future demand for government debt. The cost of protecting Irish government debt against default rose.
"The bond situation in Ireland was worse than expected, so investors looked to move money into a safe haven, which is gold," said Michael Daly, gold specialist at futures broker PFGBest. In early trade, gold looked set to drop following sharp gains at the end of last week, but remained near record highs even as the dollar rallied against the euro on renewed sovereign debt worries.
Spot gold rose 1.1 percent to $1,410.30 an ounce at 2:52 pm EST (1952 GMT), after setting a record at $1,409.40. US December gold futures settled up $5.50 an ounce at $1,403.20, with COMEX open interest surging about 2.5 percent to an all-time high 643,404 lots on Friday.
Underlying support helped lift the metal after Zoellick's comments, although most analysts deemed it unrealistic. Silver hit a fresh 30-year peak at $27.65 an ounce and traded up 3.7 percent at $27.61 an ounce, and palladium surged 3.5 percent to $710.72, up for a fourth day in a row, while platinum edged up 0.3 percent at $1,771 an ounce.