Bullion powered to a lifetime high for a fifth consecutive session on Thursday on a sharply weaker dollar, while lingering tensions in the Arab world, worries about the euro zone crisis and U.S. fiscal health offered additional support.
Gold's decade-long bull run could continue in the next four years, though at a slower pace, with positive inflation risks partially cooled by a shift toward more normal economic conditions, analysts polled by Reuters said.
Silver roared to its highest in more than three decades as it tracked a rally in gold, which was also spurred by a threat of a downgrade to the United States' triple-A credit rating. The gold-silver ratio -- the number of silver ounces needed to buy an ounce of gold -- was at its lowest since 1983.
Spot gold rose to a record high of $1,508.50 an ounce and stood at $1,506.70 an ounce by 2:07 EDT, up $8.55 an ounce. U.S. gold futures also hit a lifetime high at $1,509.5 an ounce.
The U.S. effectively lost its triple-A rating in the eyes of investors that really matter quite some time ago, back when gold broke $1,000 an ounce, said Fat Prophets commodities analyst David Lennox.
We don't think America's perceived rating will improve anytime soon and this is the driving force behind our expectation of gold's continued price strength. Our next target for gold is $1,590 an ounce.
A bullish target at $1,518 per ounce remains intact for spot gold as indicated by an inverted head-and-shoulders pattern and its wave pattern, said Wang Tao, a Reuters market analyst for commodities and energy technicals.
Spot silver rose as high as $46.05 an ounce, its strongest since 1980, when the Hunt Brothers of Texas cornered the silver market.
The dollar tumbled to a three-year low against a basket of currencies on Thursday, with market players selling the greenback to buy buoyant risky assets in a move that threatens to drive the dollar index toward its historic low.
The dollar index fell 0.6 percent from late New York trade to 73.898, the lowest since August 2008 -- just before it surged during the Lehman Brothers collapse as investors scrambled for safe-havens.
The physical market in Asia saw limited selling of scrap as investors waited for bigger gains. Dealers noted physical buying from India in the previous session ahead of a key religious festival, suggesting that consumers had no choice but to buy bullion at higher prices.
India, the world's largest gold consumer, celebrates Akshaya Tritiya on May 6, when consumers buy gold to invoke prosperity.
Sentiment is still bullish, we can say. The dollar is weakening and there is no solution to the situation in Libya. There's a downgrade in the U.S. rating and there's still uncertainty in the euro zone. It's messy around the world, said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
But I think gold is rising too fast. We are waiting for some kind of correction in the near future, hopefully next week.
France promised Libyan rebels on Wednesday it would intensify air strikes on Muammar Gaddafi's forces and send military liaison officers to help them as fighting raged in Misrata.
Gaddafi's government is circumventing international sanctions to import gasoline to western Libya by using intermediaries who transfer the fuel between ships in Tunisia.
Brent crude climbed above $124 a barrel on Thursday as U.S. crude inventories fell unexpectedly last week and a sharply weaker dollar triggered a rush into riskier assets.
(Additional reporting by Rujun Shen in SINGAPORE and Jim Regan in SYDNEY; Editing by Himani Sarkar)