Gold rose on Friday as deepening concerns over eurozone sovereign debt levels after a fresh downgrade of Portugal's credit rating and simmering violence in the Middle East underlined its safe-haven appeal. Spot gold was bid at $1,434.20 an ounce at 1535 GMT, against $1,429.49 late in New York on Thursday. US gold futures for April delivery eased 50 cents to $1,434.40.
The precious metal is struggling to overcome strong resistance near the previous session's record high of $1,447.40 but remains firmly supported at current levels, analysts said. "The Portuguese debt issue got everyone extra jittery," said Societe Generale analyst David Wilson, who added that the sustainability of the rise would depend on how quickly bailout negotiations were resolved and on the Middle East situation.
Worries about the financial health of heavily indebted Portugal were stoked by a two-notch downgrade of the country's credit ratings by Standard & Poor's, a day after Prime Minister Jose Socrates resigned. The euro eased 0.2 percent against the dollar in mid-afternoon trade, while Portuguese borrowing costs hit new highs on Friday following the ratings cut.
European leaders agreed at a summit in Brussels on Thursday to increase their financial rescue fund to 440 billion euros ($623 billion) by June but avoided discussing Portugal, which is under pressure to seek a bailout after Socrates' resignation.
"The EU summit in Brussels has once again revealed the lack of unity of state and government heads: the financing of the current EU rescue fund remains uncertain and the payments into the projected capital stock for the future bailout mechanism have been changed again," Commerzbank said in a note. Violence in the Middle East and North Africa also supported demand for gold as a haven from risk.
Rebel gunners fought artillery duels with Muammar Gaddafi's forces in eastern Libya on Friday, while a witness told Al Jazeera that Syrian security forces had killed at least 20 people in the town in Sanamein. For the moment, the metal remains constrained by chart pressures, with strong resistance seen near Thursday's record high.
"(Gold) managed to make fresh highs, but that lack of follow-through was a bit of a disappointment," said ScotiaMocatta in a note. "The metal traded up as high as 1,447 to set a fresh record ... (but) we think the move was a bit forced." Despite gold's recent strong performance, inflows into exchange-traded funds backed by the precious metal remained lacklustre, with holdings of the largest, New York's SPDR Gold Trust, down by another 0.9 tonnes on Thursday.
They are so far on track to fall more than 65 tonnes this quarter alone, which would be the fund's largest quarterly outflow since it was launched in 2004. However, interest in bullion from other sources is outweighing these outflows. The People's Bank of China said on Friday that concerns about inflation would trigger demand for gold as a store of value, though it noted the precious metal's bull run may be near its end.
"Clearly, the PBoC has become quite concerned about inflationary pressures, and with growing concerns across developed markets and rising geopolitical conflict, they see the yellow metal playing an important role as a store of value," UBS said in a note.
Silver was at $37.43 an ounce versus $37.12, having retreated from the previous session's 31-year high at $38.13 an ounce. Holdings of the largest silver ETF, the iShares Silver Trust, leapt to a record 11,140 tonnes on Thursday. Platinum was at $1,745.60 an ounce against $1,749, while palladium was at $750 against $748.97.