Gold rose 1 percent to a four-month high above $1,670 an ounce on Thursday, bolstered by hopes for a new round of U.S. monetary stimulus and news that Spain is negotiating conditions for a possible aid package.
Silver surged 2 percent and platinum group metals also climbed on supply concerns due to labor unrest in South Africa.
Precious metals received a boost after sources told Reuters Spain is in talks with the euro zone over conditions for international aid, even though the country has made no final decision to request a bailout.
Bullion consolidated its breakout above a four-month trading range and technical resistance at the 150-day and 200-day moving averages. However, gold's relative strength index suggests the market might be slightly overbought following its seventh consecutive day of gains.
The move higher came amid already-bullish market sentiment, with Wednesday's minutes from the U.S. Federal Reserve's August meeting showing policymakers were ready to deliver more stimulus "fairly soon" unless the economy improves considerably.
"This is the first insight we've gotten in the marketplace to think that the Fed is committed to this new stimulus program, and that's the catalyst you need to break out of the range," said Jeffrey Sherman, commodities portfolio manager at DoubleLine Capital LP, which has over $40 billion in assets under management.
Spot gold gained 0.9 percent to $1,668.70 an ounce by 2:25 p.m. EDT (1825 GMT), having risen 3.5 percent so far this week.
That put gold on track to post its largest monthly rise since January's 11 percent increase.
U.S. gold futures for December delivery settled up $32.30 at $1,672.80 an ounce. Trading volume looked set to challenge its highest in almost a month, preliminary Reuters data showed.
Silver rose 2.2 percent to $30.49 an ounce.
Bullion broke ranks with U.S. equities, which fell after the number of Americans filing new claims for jobless benefits unexpectedly increased, and after St. Louis Federal Reserve President James Bullard played down the odds of imminent easing.
WEAKNESS SEEN IF FED DISAPPOINTS
Bullion is now up nearly 7 percent year to date, still below the 15 percent in January when the Fed signaled it might use more stimulus and would keep interest rates near zero until at least 2014.
“Market expectations on monetary easing might be too highand that could lead to pullbacks," said Nicolas Berge, a trader at Geneva-based hedge fund Absolute Capital Group which invests in commodities futures and currencies.
Gold's breakout above its downward trend confirms the potential start of a longer-term bull market, Berge said.
Bullion held in top exchange-traded funds monitored by Reuters hit a record by Wednesday's close, having risen by more than 600,000 ounces this week so far, marking the largest weekly rise since early February.
Gold investors also monitored news that Citi Private Bank deciding it will withdraw up to $500 million from long-time gold bull and prominent hedge fund manager John Paulson's flagship Advantage funds, which held some gold investments.
In platinum group metals (PGM), ETF Securities said that its U.S. PGM exchange-traded products added nearly $50 million in new assets in the last week due to supply worries following deadly violence and work stoppage in South African mines.
Platinum rose 0.4 percent to $1,536.75 an ounce and palladium was up 3.5 percent at $650.75 an ounce.