Gold steadied near $990 an ounce on Friday, consolidating a potent two-day rally that took the market to within a whisker of $1,000, with inflation concerns and jitters over stock market gains stoking investor interest.
Silver also held above $16 an ounce after hitting its firmest level since August 2008 on Thursday at $16.26, boosted by gains in gold.
Gold is benefiting from uncertainty over the strength of the economic recovery, with investors who see the recovery faltering buying the metal as a haven from risk, while those who believe it is sustainable choose the metal as an inflation hedge.
Spot gold was bid at $989.70 an ounce at 1119 GMT (7:19 a.m. EDT), compared with $990.10 late in New York on Thursday. It reached a peak of $997.20 an ounce that session, its firmest since Feb 23 and is within sight of the $1,030.80 high hit in March 2008.
Buying of gold exchange-traded funds picked up, with holdings of the largest, New York's SPDR Gold Trust, posting its biggest one-day percentage rise since March.
That buying underscored a fresh burst of investor interest from those seeking a refuge from faltering confidence on a broader global economic recovery. Traders said the core of that concern sprang from share prices after Shanghai stocks hit three-month lows this week.
Revived share market sentiment on Friday dented gold's momentum in early European trade, but analysts said the metal looked poised to push higher if the dollar weakened or equities lost ground with the record high not far out of reach.
It seems there is a flight back to safe-haven assets, said Simon Weeks, head of precious metal sales at Scotia Mocatta in London, adding that a technical break through $962 and $976 had provided powerful momentum to prices.
PAYROLLS, THE TRIGGER?
The key event risk for Friday is U.S. non-farm payrolls data at 1230 GMT, ahead of a meeting of G20 finance ministers this weekend. The U.S. jobs numbers are seen setting the tone for the dollar, with investors pondering over how the U.S. currency and -- by extension -- gold will react.
Any dollar strength on a positive data surprise would dent expectations of a near term move to $1,000 as a stronger U.S. currency makes dollar-priced gold less attractive for non-U.S. investors.
A Reuters survey forecast 225,000 jobs were lost in August compared with a loss of 247,000 jobs in July.
Losses on the stock markets were behind gold's break higher early in the week, after a 7 percent slide in Chinese shares on Monday sparked losses in Europe and the United States, though bullion's climb soon picked up momentum of its own.
(The rally) was triggered by safe haven buying, and then it became a self-fulfilling prophecy, said Ambrian analyst Brock Salier. People were just piling in because it was going up.
On foreign exchange markets, the dollar index <.DXY>, which measures the U.S. currency's performance against a basket of six others, weakened 0.16 percent as the market braced for the payrolls data.
Meanwhile U.S. gold futures for December delivery on the COMEX division of the New York Mercantile Exchange fell $5.70 to $992.00 an ounce.
Among other precious metals, silver prices steadied after hitting a 13-month high late on Thursday. Silver was at $16.03 an ounce against $16.08.
The world's largest silver-backed ETF, the iShares Silver Trust, also said its holdings rose 61.18 tonnes on Thursday to 8,726.2 tonnes.
Elsewhere platinum was at $1,252 an ounce against $1,249.50, while palladium was at $288.50 against $289.
(Additional reporting by Julie Crush; Editing by Keiron Henderson)