Gold rose toward $1,675 an ounce Wednesday, hitting its second record in two days, as investors sought refuge from stock market volatility, a slowing economy and an extended period of loose U.S. monetary policy.
Bullion rose as the Wall Street hit a low for year after data showed U.S. services sector growth in July unexpectedly slumped to its lowest level since February 2010. The number of jobs created by the private sector also slowed. The S&P later turned higher, trying to avoid its eighth consecutive losses.
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Analysts said the weak data made the Federal Reserve more likely to keep U.S. interest rates extremely low and its balance sheet bloated for an extended period to boost the sputtering economy.
This view brought investors into gold, as did jitters about a widening euro zone debt crisis and a possible downgrade to the U.S. AAA credit rating. Global central banks also have been adding bullion to their reserves, a trend that many believe will continue.
``It's very hard to find an asset that investors are comfortable with for any length of time. There is an expectation that the government is trying to inflate its way out of the problem, and gold is functioning as the ultimate safe haven and currency,'' said Leo Larkin, metals equity analyst at Standard & Poor's.
Spot gold was up 0.2 percent at $1,662.74 an ounce by 2:58 p.m. EDT, having earlier hit a record at $1,672.65, beating Tuesday's high by about $12.
U.S. gold futures for December delivery settled up $21.80 to $1,666.30 an ounce. Trading volume topped 200,000 lots, in line with the previous session, as investors focused on safe metals amid choppy equity and currency markets.
On weekly charts, gold rose toward $1,675 near the top of a rising channel dated to the start of gold's rally in 2008. Some analysts suggested that the metal could pull back near the channel-top resistance level.
Tom Holl, co-manager of the BlackRock World Resources Fund, said current fundamentals are supportive of the higher gold prices.
Financial markets will watch the Fed's policy-setting gathering next week for any signs of new monetary stimulus.
Some market watchers suggested Chairman Ben Bernanke may take the opportunity at the Fed's annual retreat in Wyoming later this month to hint at economic stimulus through a third round of central bank bond purchases, or quantitative easing.
Wall Street pared losses after two former top officials at the Federal Reserve conditionally endorsed a further round of bond buying by the U.S. central bank to spur a flagging economic recovery, the Wall Street Journal reported.
Gold has risen 13 percent since the start of July. Some analysts worried the sharp rally makes the precious metal vulnerable to a steep correction, but most said any pullback would be short-lived because there was enough safe-haven demand to put a floor on prices.
UBS strategist Edel Tully said the lack of a pullback attracted decent buying. The Swiss bank on Wednesday raised its three-month price forecast to $1,850, from $1,600.
Holdings of gold in exchange-traded products rose for an eighth day, to their highest level this year, after an inflow of more than half a million ounces into the world's largest bullion-backed ETF, the SPDR Gold Trust, which is now showing a net inflow for the year for the first time.
Investors who were nervous about the looming debt ceiling showdown poured $3.5 billion in July into exchange-traded funds that own gold, with the $65 billion SPDR Gold Trust adding $2.9 billion of net inflow, fund tracking website IndexUniverse.com said. CENBANKS ADD GOLD TO RESERVES
Further bolstering gold, International Monetary Fund data showed Thailand boosted its gold reserves for the third time in the last year, by 18.66 tonnes in June to 127.524 tonnes. Korea said earlier this week it bought gold in June and July for the first time in more than 10 years.
The IMF's monthly report on central bank reserves showed Thailand, Russia and Kazakhstan, among others, added to gold holdings two months ago, prolonging the trend to put more reserves into bullion rather than currencies.
Silver rose to three month highs, trading 2.1 percent higher at $41.67 an ounce.
Platinum group metals fell but losses were limited as a South African mine workers union started a new round of talks over wages that could lead to work stoppage and lost output. Platinum was down 0.6 percent at $1,779.49 an ounce and palladium fell 3.5 percent to $793.91.