Gold rose to record highs for a second day in a row on Wednesday as investors punished the dollar ahead of the Federal Reserve's possible resumption of special measures to protect the flagging economy.
Palladium rallied to its highest level in over nine years, fuelled by optimism over the potential for strong growth in demand from the auto industry.
Gold has touched all-time highs in eight out of the last 10 trading sessions, fuelled by the decline in the dollar, which is now at eight-month lows against the euro, which has profited from weakness in the U.S. currency and from the European Central Bank giving no hint that it could ease policy.
Spot gold rose as high as $1,349.80 an ounce earlier in the day, before easing back to $1,345.80 by 1430 GMT, still up from $1,338.70 late in New York on Tuesday.
U.S. gold futures also hit a fresh all-time high of $1,351 an ounce and traded up $6.6 at $1,346.80 an ounce.
While gold has hit new highs in dollar terms, this strength has not been replicated in the major gold crosses, reflecting the resilience of the euro, and Swiss franc against the greenback.
"Considering what is going on, (the price) is justified and dollar weakness is really the big driver right now," said Ole Hansen, senior manager at Saxo Bank. "If you look at gold in euro terms, it's still trading sideways. It's not as if it's really having a life of its own."
The dollar hit 15-year lows against the yen on Wednesday and an 8-1/2 month low against a basket of currencies, dented by expectations the Fed will take steps to keep monetary policy as loose as possible, which would erode the return on dollar-denominated deposits for non-U.S. investors.
In dollar terms, gold is up 2.8 percent so far this month, while euro-priced gold is up 1.1 percent, yen-denominated gold is up 2.2 percent and Swiss franc-priced gold is up 0.95 percent.
"We've seen this huge move in the euro because, essentially, it's thought the U.S. will do more quantitative easing, the ECB is trying to pull back from that and headlines such as 'IMF warns of currency wars' is all grist for the mill for gold really," said Matthew Turner, analyst at Mitsubishi.
International Monetary Fund Director Dominique Strauss-Kahn said in comments published on the FT website on Tuesday that countries risk undermining the global economic recovery if they use their currencies to boost domestic growth.
Economic uncertainty and, primarily, a weak dollar have helped gold rally 8 percent from a month earlier and 23 percent so far this year. Traders and analysts expected the momentum to stay after a surprise interest rate cut from the Bank of Japan fuelled anticipation of more monetary easing from the Fed.
On the physical market, there was light scrap selling from Thailand and short-covering from speculators, according to a Singapore-based dealer, while in top consumer India the strength of the local currency tempered demand.
Spot silver rose to a fresh 30-year high of $23.06 an ounce, before easing to $22.85 still showing a gain on the day after Tuesday's notional close at $22.78.
Investor interest in silver continued to rise. Holdings in the iShares Silver Trust, the world's largest silver-backed exchange-traded fund, rose 94.32 tons to a new all-time high of 9,877.20 tons by Oct 5.
Platinum group metals rose along with gold.
Palladium rallied to its highest since July 2001, having hit a session peak at $591.50 an ounce, before paring some gains to trade at $584.50, up from $574.60 the day before.
Constrained supply and roaring demand from auto markets in the emerging world, and in particular China, have pushed the price of palladium up by over 45 percent this year.
"It's a mixture of optimism about developing markets, also a feeling that a double-dip recession has been avoided maybe," said Mitsubishi's Turner. "I think perhaps also you're seeing this belief that if you get currency wars and QE, then real assets are the way forward, so it's a dollar move as well."
Platinum hit $1,705.50 an ounce, highest since mid-May, before easing to $1,700.00, from $1,693.75.
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