Gold hit record highs on Friday and silver its strongest since early 1980 as the dollar slid to 15-month lows versus the euro, with concerns over euro zone debt and unrest in the Middle East region further supporting buying.
Spot gold rose as high as $1,468.81 an ounce and was bid at $1,468.70 an ounce at 10:57 SA time, against $1,457.45 late in New York on Thursday. Silver was bid at $40.18 an ounce against $39.51, having earlier risen as high as $40.22.
Friday's slide in the dollar added fuel to a rally that has already taken gold to a series of record highs this year.
“It is mainly the weaker U.S. dollar which is the driver today for gold prices,” said Commerzbank analyst Carsten Fritsch. “If the euro-dollar rate rises further, gold will follow suit.”
The euro was buoyed by expectations for further euro zone rate rises, while the dollar came under pressure from a looming budget deadlock in the United States.
Meanwhile oil climbed to its highest level in 2-1/2 years as supply cuts stemming from attacks on Libyan oilfields offset demand concerns spurred by a major aftershock in Japan.
Libyan rebels said five of their fighters were killed when NATO planes mistakenly bombed a rebel tank column, and a top U.S. general said they were unlikely to be able to oust Muammar Gaddafi by force.
Gold has hit a series of peaks since January as violence across the Middle East and North Africa sparked safe-haven buying and pushed oil prices to multi-year highs.
Expectations euro zone interest rates would rise curbed gains, but gold broke higher after European Central Bank chief Jean-Claude Trichet suggested an ECB rate hike announced on Thursday would not necessarily be the first of a series.
ETFs SEE INFLOWS
Concerns over euro zone debt are also supporting precious metals. Euro zone finance ministers will discuss Portugal's bailout plea on Friday, including how much it needs and what reforms it could do in return.
“Inflationary concerns and sovereign debt worries in Europe (are) heightening demand for value store and safe haven investments,” said Fairfax analyst John Meyer in a note.
Meanwhile interest in gold-backed exchange-traded funds picked up, with holdings of the largest, New York's SPDR Gold Trust , increasing by just over 11 tonnes on Thursday, their biggest one-day rise since Jan. 21.
Holdings of the COMEX Gold Trust rose by 260,000 ounces on Thursday, while those of the Sprott Physical Gold Trust increased by 6.29 percent to 1,024,322.0 ounces between Wednesday and Thursday.
Meanwhile holdings of the largest silver ETF, the iShares Silver Trust , rose to a fresh record at 11,192.8 tonnes on Thursday.
Silver is becoming increasingly expensive compared to gold as prices of both assets rise. The gold:silver ratio - the number of silver ounces needed to buy an ounce of gold - fell to a 28-year low near 36 on Friday. - Reuters