Gold rose above $1,430 an ounce on Friday, while silver surged 3 percent to 31-year highs, as soaring oil prices fueled by widening clashes in Libya prompted investors to pile into safe havens.
Bullion hit a record high of $1,440.10 an ounce on Wednesday, notching its fifth consecutive weekly gain on fears that Libya's escalating unrest could spread across the Arab world.
Wall Street lost nearly 1 percent and the dollar declined as upbeat U.S. jobs data was offset by fears that rising political tensions in North Africa and the Middle East could crimp economic growth.
It's really all about oil, and I suspect that's going to be the pattern next week as well. Gold's uncertainty hedge and ultimate currency roles continue to be very much in place, said Bill O'Neill, partner of LOGIC Advisors.
U.S. crude prices jumped to their highest levels since September 2008 as Libyan security forces cracked down on protesters in Tripoli and clashed with rebels near the major oil terminal of Ras Lanuf.
Spot gold hit a high of $1,431.85 an ounce and was up 0.8 percent at $1,427.31 by 2:08 p.m. EST (1908 GMT). Gold fixed at $1,427 in London.
U.S. gold futures for April delivery settled up $12.20 at $1,428.60, with volume down nearly 50 percent from the previous session and 30 percent below its 30-day average.
The positive correlation between gold and oil has been strong of late, but its prospects appear questionable going forward.
Turnover has been weaker than usual during gold's rally, prompting some analysts to question whether the precious metal has much upside potential without the aid of soaring oil prices and geopolitical tensions.
Net long positions in U.S. gold futures contracts held by speculators rose nearly 10 percent last week as bullion prices rallied 2.5 percent, data from the U.S. Commodity Futures Trading Commission (CFTC) showed on Friday.
Spot silver gained 3.3 percent to $35.31 an ounce, having earlier hit a high of $35.46, its loftiest price since 1980.
Silver has risen on record coin buying in a tight physical market and strong demand for industrial metals as the economy recovers.
Terry Hanlon, president of precious metals dealer Dillon Gage Metals, said that demand for the popular one-ounce American Eagles silver bullion coins way exceeds supply, and the trend could continue for a long time.
Silver eagles hit a record 6.4 million ounces in the first month of 2011, U.S. Mint data showed. February sales rose year-on-year but was lower than January's level.
The gold-silver ratio, which shows how many ounces of silver it takes to buy one ounce of gold, fell to a 13-year low, the weakest since 1998 when billionaire Warren Buffett bought 130 million ounces of silver.
Holdings in the world's largest silver ETF, the iShares Silver Trust, rose to 10,794.89 tonnes by March 3, the largest since early January.
U.S. EMPLOYMENT REBOUNDS
Gold held gains even as data showed U.S. employers hired workers at the fastest pace in nine months in February and the jobless rate slipped to a nearly two-year low of 8.9 percent, showing the economy is finally kicking into a higher gear.
In January, the metal lost over 6 percent as signs of an improving global economy and easing worries about a European debt crisis weighed on bullion's safe-haven appeal.
The U.S. Federal Reserve in November resumed buying long-dated government bonds to keep interest rates down, a process known as the second round of quantitative easing or QE2.
With the program now at its midpoint, investors are wondering how long gold can keep rising before the Fed decides to raise interest rates.
Comments from the European Central Bank stoked expectations that euro zone monetary policy would tighten sooner rather than later and knocked gold sharply lower on Thursday.
Among other precious metals, platinum gained 0.6 percent to $1,834.24 an ounce and palladium eased 0.4 percent to $808.72.