Gold climbed to a fresh two-month high on Friday, breaching $960 an ounce for the first time since late March, as the dollar's slide against a basket of currencies boosted buying of the metal as a currency hedge.
Silver prices posted the biggest percentage gains among precious metals, however, climbing to a nine-month peak of $14.83 as investors turned to the metal as a cheaper alternative to gold.
Spot gold touched a high of $961.30 an ounce and was bid at $960.35 an ounce at 9:18 a.m. EDT, against $953.40 an ounce late in New York on Thursday.
U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange rose $9.60 to $960.80 an ounce.
Simon Weeks, director of precious metals at the Bank of Nova Scotia, said the majority of gold's gains were dollar-related, with investors buying hard assets as opposed to hard currency.
Physical (buying) has been okay, but I expect a big increase in the open interest on the long side on the COMEX, he added.
The dollar continued its slide on Friday, with the euro trading above $1.40 for the first time since early January, as fears over U.S. sovereign ratings accelerated a drive away from the unit.
Ratings agency Moody's Investor Services said on Thursday it was comfortable with its U.S. rating but that it was not guaranteed forever, while Standard & Poor's cut its outlook on Great Britain to negative from stable.
Fears over the economic outlook and the financial system fuelling interest in gold as a haven from risk.
Bullion is also technically well-positioned to make further gains, according to Calyon metals analyst Robin Bhar.
We have closed for two days above the $935 level, so the technical guys will be saying we now have confirmation of a successful upside break, he said.
We've seen in the past gold has put in some false starts and never really achieved a clean break-out. If we close at these sorts of levels, it will look really good on the weekly charts, and provide even more upside potential.
Stronger oil prices, which hovered around their six-month peak, also supported gold. Bullion can be bought as a hedge against oil-led inflation, while rising crude prices can also boost interest in commodities as an asset class.
Investor interest in gold-backed exchange-traded funds remained relatively lackluster, however. Holdings of the largest gold-backed ETF, the SPDR Gold Trust, were unchanged for a sixth consecutive session on Thursday.
London's ETF Securities noted an outflow from their Physical Gold ETF (PHAG.L: Quote). Its holdings declined nearly 69,000 ounces or 2.5 percent on Thursday.
Among other precious metals, silver jumped to a fresh nine-month high on Friday, also benefiting from dollar weakness. The metal has risen more than 5 percent so far this week. Spot silver was bid at $14.70 an ounce against $14.51.
Strong ETF buying has been a key factor boosting silver prices in recent weeks. ETF Securities' silver (PHAG.L: Quote) holdings were at a record 19.462 million ounces on Thursday.
We expect the metal to continue to benefit from inflation fears and investor diversification, and think silver is brewing for an upside push of its own, potentially targeting the $16.40 level, said TheBullionDesk.com analyst James Moore in a note.
Platinum was quoted at $1,149 an ounce against $1,148.50 late on Thursday, while palladium was at $232.50 an ounce against $231.
Fellow platinum group metal rhodium dipped $50 to $1,400 an ounce, giving up some of this week's earlier gains.
(Reporting by Jan Harvey; Editing by Peter Blackburn)
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