Gold rallied to its highest in nearly two weeks on Monday as investors seeking safety bought the precious metal after a barrage of bad news on debt and ratings from euro zone countries such as Greece.
Spot gold hit $1,518.71 a troy ounce, its highest since May 11. It was bid at $1,508.24 an ounce at 0941 GMT from $1,507.39 late in New York on Friday. Gold priced in euros hit a record high of 1,076.42 euros an ounce.
The trigger for gold's rise came on Friday after ratings agency Fitch cut Greece's debt ratings by three notches.
Further reasons to buy gold came in the form of doubts about Spanish austerity measures, an outlook downgrade to Italy's credit rating and growing speculation about Greek debt restructuring.
"The driving factor is obviously concerns about Greece and whether there will be a debt restructuring," said Robin Bhar, analyst at Credit Agricole.
"Greece is important in terms of the implications it will have for other weak euro zone economies such as Ireland and Portugal. Markets have started the week in risk-off mode."
Greek Prime Minister George Papandreou will discuss new measures with his cabinet on Monday to cut the budget deficit, in an effort to convince lenders Greece can deal with a debt crisis without a restructuring.
However, holding gold in check is the higher dollar against the euro, which makes commodities priced in the U.S. currency more expensive for holders of other currencies.
LEAVING IN DROVES
Strong investor interest in gold can be seen in flows into physical exchange traded funds (ETFs).
Gold ETFs saw their first daily inflow in nearly three weeks on Friday, which was also the biggest one-day inflow in a month thanks to a 341,000 ounce rise in SPDR holdings, reversing the outflows of the week.
In silver ETFS, holdings fell by more than 10 million ounces last week to a new low for the year.
Spot silver was bid at $34.65 an ounce from $35.01 late on Friday. and platinum at $1,747.30 from $1,768.50.
"Investors still seem to be leaving platinum and palladium ETFs in droves," a precious metals trader said.
Platinum ETFs shed 18,000 ounces of metal last week in their largest weekly decline since the week of March 25.
Palladium ETF holdings have fallen for five weeks on the trot now, down 48,000 ounces last week.
Spot palladium was bid at $724.75 an ounce from $734.00 late on Friday.
Both platinum and palladium are used to make autocatalysts for cars, production of which is expected to accelerate this year and next.
"Given the positive fundamental backdrop, we think the risks are rather skewed to the upside, with $1,780 marking an important resistance for platinum and $730 being a key level for palladium," Credit Suisse private banking said in a note.
(Reporting by Pratima Desai; editing by Keiron Henderson)