Gold soared to a new record high Thursday, as a combination of concern over the impact of the euro zone debt crisis and downbeat U.S. data encouraged a fresh sweep into safe-haven assets.
European ministers jointly backed the publication of so-called bank "stress tests," which drove the euro to three-week highs, along with a successful Spanish bond auction.
Spot gold was last bid around $1,248.40 an ounce midday Thursday, against $1,229.60 late in New York on Wednesday. U.S. gold futures for August delivery settled at $1,248.70, a record high.
"It's the age-old story, that however illogical it seems, gold is looking for any and every opportunity to go higher, and we all know the reasons why, the safe-haven factor, sovereign debt risks and so on," said Peter Hillyard, head of metals sales at ANZ Investment Bank.
"The mood is with gold right now, the momentum is with gold and the market will either do nothing or go up," he said.
U.S. data that showed consumer prices posted their largest fall in nearly 1-1/2 years in May and a surprise rise in weekly unemployment claims increased the chances of the Federal Reserve maintaining its policy of ultra-low interest rates as the economy struggles to shake off the vestiges of recession.
Another report showing a surprise drop in Mid-Atlantic business activity knocked equities into negative territory and pushed crude oil below $78 a barrel.
Gold has risen as much as 14 percent since the start of the year, spiking to a record high at $1,251.20 an ounce last week fueled by the belief that Europe's sovereign debt issues could severely undermine the euro.
"Many people missed it to buy, as it was moving up too fast," Commerzbank senior trader Michael Kempinski said. "Physical demand slowed down, but people are buying the dip. I'm quite optimistic for gold, especially gold in euros."
Kempinski said investors were buying gold as an alternative to all paper currencies.
The concern investors have about some debt-laden euro zone economies, such as Spain, has not receded.
The premium bond holders demand to own 10-year Spanish government debt over benchmark German bunds hit a euro lifetime high on Thursday, although an auction of Spanish 10-year bonds attracted good demand.
The euro trimmed some of its gains versus the dollar but still traded up on the day after the Spanish auction soothed some fears about the country's public finances.
Industrial commodities weakened, with copper and aluminum sliding between 2.5 and 3 percent as the data out of the United States cast doubt on the pace of demand growth.
The U.S. government said its monthly consumer price index fell 0.2 percent last month, the largest decline since December 2008, after dipping 0.1 percent in April, while a reading of weekly initial jobless data showed claims rose by more than expected to 472,000 last week.
At a summit of EU ministers in Brussels, Germany joined France and Spain in calling for the publication of bank stress tests and leaders sought to play down Spain's problems and said the country was not on the agenda.
Interest in physical gold as an investment product kept holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, at a record above 1,306 tons on Wednesday.
Silver was last bid around $18.82 an ounce against $18.40, while platinum neared $1,565.40 an ounce versus $1,566.50 and palladium was about $475.00 against $471.
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