Gold was set for its biggest weekly gain in four months, drawing support from renewed euro zone sovereign debt fears amid Portugal’s financial crisis and inflation jitters as crude oil and corn hit new highs this week.
Bullion broke above key resistance on technical charts and could target above $1,500 an ounce. The metal has risen more than 10 percent since late January when political unrest began to flare in the Middle East and North Africa.
“With the expected future inflation being higher in this low interest rate environment, investors are more inclined to have some contributions to commodities as an inflation hedge,” said Hakan Kaya, commodities portfolio manager at Neuberger Berman, which manages about $190 billion client assets.
Spot gold rose as high as $1,474.19 an ounce and was later up 1 percent at $1,472.20 an ounce by 1636 GMT. Bullion was on track to rise 2.5 percent this week for a fourth straight weekly gain. US gold futures for June delivery gained 1 percent to $1,473.60.
Gold remained far below its all-time inflation-adjusted high, estimated at almost $2,500 an ounce set in 1980 as a result of heightened geopolitical pressure and hyperinflation.
US futures activity was sharply below average for a second consecutive day, but analysts said low volume is not detrimental to the bull run after a strong price rally.
Silver rose 2.3 percent to $40.42 an ounce, just off the session high of $40.49.
The gold-to-silver ratio — the number of silver ounces needed to buy an ounce of gold — fell to a 28-year low near 36 on Friday.
“One would expect silver to outperform in this environment because it bears a higher risk than gold on a volatility basis,” Kaya said.
The dollar slide against the euro, supported by widening interest rate differentials after ECB’s rate hike, and crude oil’s surge to 2-1/2 year high added fuel to a rally that has already taken gold to a series of record highs this year.
Gold also benefits from dollar weakness as Democratic and Republican congressional leaders said on Friday there was no overall deal on government funding for the rest of the fiscal year that ends Sept. 30, and could not even agree on what disagreements remain ahead of the midnight Friday deadline.
The looming US government shutdown was “simply a minor problem of far greater problems,” said Camilla Sutton, chief currency strategist at Scotia Capital. The issues with the US dollar are not temporary and the dollar is expected to remain weak this year, she added.
On charts, gold breached important technical resistance at $1,466 an ounce near Thursday’s high, said Rick Bensignor, chief market analyst at Dahlman Rose.
If bullion could hold above $1,466 early next week, it should next target an area between $1,500 and $1,510 an ounce, Bensignor said.
Among other precious metals, platinum gained 1.3 percent to $1,803.74 an ounce, while palladium jumped 2.2 percent to $791.97.
