Gold surged to a record high above $876 per ounce on Tuesday as investors poured into the market, confident of further upside in the metal with support from a weaker dollar and firm oil.
Spot gold sprinted to a record $876.40 an ounce, surpassing the historic high of $869.05 hit last week.
By 9:54 a.m. EST, bullion stood at $874.10/874.80, up roughly 1.7 percent from $859.70/860.40 quoted late in New York on Monday.
There's extraordinary investor appetite for gold which seems relentless, SGCIB economist Stephen Briggs said.
The buying just seems to go on and on and on.
Other bullion markets reflected the move in spot gold. U.S. gold futures rose sharply to a record high above $875 an ounce at the start of Tuesday's pit trade. The most-active contract for February delivery jumped $15 to $877.00.
In Tokyo, the key December 2008 gold contract on the Tokyo Commodity Exchange (TOCOM) ended at 3,097 yen a gram, up 53 yen or 1.7 percent from Monday's close of 3,044 yen.
Traders and analysts said gold and other commodity prices had found support so far in January from fund re-allocation cash, with pension funds and other long-term investors having pumped an estimated more than $100 billion into commodities over the past five years.
There's significant buying from people re-rating their commodity indices and adding to the amount of gold they have, said Ross Norman, managing director at TheBullionDesk.com.
Traders also noted buying interest ahead of the launch of the Shanghai gold futures contract.
But the stakes were being raised for a corrective sell-off as investors are holding large long positions already.
The Commodity Futures Trading Commission said in its latest Commitments of Traders report that the non-commercial net long position rose to 199,438 lots in the week up to December 31, from 184,375 lots a week earlier.
There is definitely investor money coming into the market which is no surprise with economic environment's ongoing uncertain outlook, said Alexander Zumpfe, a trader at Heraeus.
Although the first quarter is traditionally a positive one for the metal, it is nonetheless surprising that is trading from one record to another, he said.
Broader investment interest in gold remained solid moving into 2008, with gold held in New York-listed StreetTRACKS Gold Shares, the world's largest gold-backed ETF, rising to a record high of 639.35 tonnes by Jan 7.
The steady influx of money to gold ETFs ... and the large volume of shares in the big gold mines being traded are proof that there are still a large number of new investors attracted to this market, which should provide a support line for the price, Commerzbank analyst Eugen Weinberg said in a note.
Fundamentals played in gold's favor with a weaker dollar making the metal cheaper for non-U.S. investors, while firm oil highlighted its allure as a hedge against oil-led inflation.
Crude rebounded above $96 a barrel on Tuesday after falling 3 percent on Monday as the potential for a recession in top fuel consumer the United States led investors to expect lower demand.
In other metals, platinum advanced in line with sharp gains in Japanese platinum futures. Key TOCOM platinum for the December delivery closed up 1.5 percent at 5,313 yen a gram.
Japanese platinum futures often set the trend for the cash price as TOCOM is the most liquid market for the white metal.
Spot platinum rose as high as $1,547 an ounce and was last quoted at $1,540/1,544, versus $1,530/$1,534 quoted in New York late on Monday, closing in on last week's record $1,553.
Palladium rose to $372/376 an ounce from $365/$368, while silver was at $15.52/15.57, against $15.12/15.17.
(Additional reporting by Atul Prakash in London and Chikafumi Hodo in Tokyo)
(Editing by Chris Johnson)