Gold jumped 1.6 percent to a 28-year high on Friday, boosted by a record low dollar and firmer oil prices, while platinum reached a 10-month peak and looked to test an all-time high.
Spot gold rose as high as $745.50 an ounce, its highest level since January 1980 when the metal rose to $850, and was quoted at $744.35/745.05 by 10:03 a.m. It closed at $733.80/734.60 in New York late on Thursday.
The euro/dollar is still higher and eyes are also on oil prices. We have a good chance to see gold even higher as speculators and investors are still interested to buy some gold here, said Michael Kempinski, senior trader at Commerzbank.
Gold's outlook is very positive and technically also it looks good, but the market is very volatile. I would buy the dip here. The short-term target is $750, he said.
The dollar fell to a record low against the euro and a basket of major currencies after tame inflation data backed views the Federal Reserve would cut interest rates again to shore up economic growth.
The market was bracing for upcoming data on regional U.S. business activity and on consumer confidence, as well as speeches by many Fed officials during the session for more clues on the magnitude of the anticipated monetary easing next month.
A weaker dollar makes gold cheaper for other currency holders and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.
Oil rose above $83 a barrel and closed in on an all-time high as fund buying, spurred by a weak dollar, provided support.
BLEAK DOLLAR OUTLOOK
The U.S. economy faces the most downside risks and, given the dependence of the U.S. on foreign willingness to fund its current account deficit, the prospects for the dollar are bleak. The dollar outlook remains particularly price positive for gold, Barclays Capital said in a research note.
In central bank news, the Swiss National Bank said it sold 113 tonnes of gold in the last three months as part of its sales program of selling 250 tonnes by the end of September 2009.
Sweden's central bank said it would sell up to 10 tonnes of gold during the next 12 months and use the proceeds to buy foreign currency denominated securities.
In other bullion markets, benchmark August 2008 gold futures on the Tokyo Commodity Exchange rose as high as 2,763 yen per gram -- the highest for any benchmark since April 1985.
The most active December gold contract on the COMEX division of the New York Mercantile Exchange hit a 28-year high of $752.80 an ounce.
Platinum continued to advance on investor buying and positive fundamentals, hitting a 10-month high of $1,377/1,382 an ounce, against New York's $1,356/1,360.
Platinum is where the action is ... due to a combination of bullish fundamental and technicals and the market is now once again focusing on liquidity given that lease rates have begun to widen, said Michael Jansen, analyst at J.P. Morgan Securities.
Our view of $1400/oz in the near- to medium-term may be conservative, he said in a daily note.
Platinum lease rates remained firm at around 2.4 percent from 1.98 a week earlier, traders said.
Silver rose as high as $13.78/13.83 an ounce, the highest since June 6, against $13.50/13.55 in New York, while palladium rose to $344/348 an ounce from $341/345.