Gold hit record highs for a second successive day on Tuesday, driven by fund buying ahead of the end of the year, the prospect of more U.S. monetary easing and investor nervousness over the European debt crisis.
Silver hit a 30-year high for the seventh consecutive day, driven by a weakening dollar and a push into commodities by the investment community ahead of the end of the year. Gold in euros also hovered near record highs as tension on the bond markets ran high.
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Spot gold rose to an all-time high at $1,428.15 an ounce before tracking back to $1,427.09 an ounce at 1155 GMT, up from $1,422.85 the day before and on course for a third consecutive daily gain.
U.S. gold futures for February delivery were up $10.70 an ounce at $1,426.80.
"There is generally a good appetite for commodities, almost a feeling of missing the boat, as we see the predictions for 2011 starting to arrive and painting a pretty rosy picture for the sector as a whole," said Ole Hansen, a senior manager at Saxo Bank.
Germany and other fellow euro zone states have resisted calls from the International Monetary Fund to do more to quell the currency bloc's debt crisis and say the existing emergency fund is sufficient, although the euro edged higher on the back of optimism that Ireland would pass an austerity budget.
Gold has also got a boost from evidence the U.S. economy is not creating jobs quickly enough to bring down unemployment and from Federal Reserve Chairman Ben Bernanke's signal last week that the central bank could expand its existing policy-easing program by buying more government bonds.
TWO STEPS FORWARD, ONE BACK
With the U.S. dollar set to come under more pressure from the prospect of rising money supply, gold should reap the benefits of investors seeking an alternative to volatile currencies, analysts said.
However, the end of the year traditionally brings with it less liquidity and greater potential for rapid shifts in price direction, meaning that gold could see more setbacks before resuming its uptrend.
"Tactical investors have turned positive on gold and silver and increased their long exposure. In our view, positioning does not look excessive, suggesting that the sector could attract further near-term flows," said Credit Suisse analysts in a note.
"However, with markets closing in on critical price levels, risks of investors' taking profits have increased as well."
In investment news for gold, China's Lion Fund Management Co., which is launching the country's first gold fund worth up to $500 million, is examining a dozen gold-backed exchange-traded funds on the global market as potential targets.
Holdings of gold in the SPDR Gold Trust, the world's largest gold-backed ETF, were unchanged on Tuesday, having risen by over 11 tonnes so far this month, compared with a one tonne increase over the same period last month.
Silver rallied for a seventh day in a row, earlier rising by 1.3% to fresh 30-year highs at $30.52 an ounce, and were trading at $30.47, up from $30.14 the day before.
The world's largest silver-backed exchange-traded fund, iShares Silver Trust, said its holdings rose to 10,816.69 tonnes by December 6 from 10,778.68 on December 2. The holdings jumped to an all-time high of 10,893.68 tonnes on November 23.
The number of ounces of silver needed to buy one ounce of gold hit its lowest level since February 2007 at just 46.99, having declined from a seven-month high this February at 70.91.
Platinum was up 0.3% at $1,725.50 an ounce, while palladium was up 1.2% at $764.72.