Gold rose 1 percent to a record and silver soared on Friday, as inflation worries amid a crude oil rally and a downgrade of Ireland's sovereign debt powered bullion toward its fifth consecutive weekly gain. Silver rose to its highest in 31 years on speculative buying and tight supplies, and as data showing rising US consumer prices prompted investors to buy precious metals.
Silver's outperformance over bullion also sent the gold/silver ratio below 34 for the first time in nearly 30 years. "People are buying gold and silver as a protection against inflation. If the Fed doesn't start raising rates, inflation is really going to hit hard and cripple the economy," said Miguel Perez-Santalla, vice president of sales at Heraeus Precious Metals Management.
Spot gold rose 0.8 percent to $1,484.10 an ounce by 12:39 pm EDT (1639 GMT), having hit a record $1,487.39. US gold futures for June delivery rose $12.40 to $1,484.80. Silver gained 1 percent to $42.51. The gold-to-silver ratio - showing the relative strength between the two metals - fell to its lowest since the early 1980s. The small rise in US core inflation, and data showing moderation in long-term inflation expectations may be seen as vindication for Federal Reserve officials who have viewed the recent energy price spike as having a temporary effect.
"The Fed is not going to see inflation as a threat so they have the freedom to keep interest rates low longer," said David Wyss, chief economist at Standard and Poor's in New York. Gold also drew support from safe-haven bids on worries over the euro zone financial crisis, after more talk that Greece may be set to restructure its debt and a Moody's downgrade of Ireland.
Gold largely ignored news Goldman Sachs had recommended investors go underweight commodities over a three- to six-month horizon, echoing its call from Monday, saying oil prices were higher than justified by current supply and demand. Among other precious metals, platinum eased 25 cents at $1,786.24 an ounce, while palladium gained 0.6 percent to $765.22.