Gold rallied almost 2 percent to a record near $1,900 an ounce on Monday as a sputtering global economy boosted expectations for further monetary easing, raising bullion's appeal as a hedge against inflation.
Bullion held near its new record at $1,894.10 as Wall Street erased early gains. Global markets will focus on Federal Reserve Chairman Ben Bernanke's speech on Friday in Wyoming's Jackson Hole, where policymakers and academics meet once a year to talk shop.
Analysts said anything short of a third round of quantitative easing would likely provide limited support for gold as the Fed had already vowed to keep interest rates low into 2013. Bullion could also correct sharply after it rose 6 percent in the last three sessions, and by $400 since July.
Gold is driven by the expectation that at some point inflation will come back, and a continuation of people looking for a safe haven beside just the U.S. Treasury bonds, said Leo Larkin, metals equity analyst at Standard & Poor's.
It's still susceptible to a pretty big pullback as things are overdone based on technical indicators.
Spot gold was up 1.6 percent at $1,888.90 an ounce by 11:33 a.m. EDT, building on its strongest one-week rise since February 2009. It is one of this year's best-performing assets, now up 33 percent.
Silver rose 2.2 percent to $43.80 an ounce.
Investors have flocked to the yellow metal as a haven from the euro zone debt crisis, weakness in the U.S. economy, and volatility in the currency markets. However, analysts are worried that August's near 15-percent rally has been overdone.
People talk about gold as an insurance premium, but right now it's a really high insurance premium to pay, said Bayram Dincer, an analyst at LGT Capital Management.
Gold has benefited from the ultra-loose U.S. monetary policy of recent years, with successive rounds of quantitative easing -- which translates into printing money -- undermining the dollar and keeping real interest rates low.
Bernanke's much-anticipated speech on Friday will be closely watched for any signs of Fed policy direction. At the same meeting a year ago, Bernanke announced a $600 billion bond-buying program that sparked a rally in gold.
Platinum rose 1.3 percent to $1,894.74 an ounce, having earlier hit its highest since July 2008 at $1,897.50. It is trading near parity against gold, with the yellow metal the chief recipient of safe-haven flows.