Other precious metals also rallied.
Silver surged to its fourth straight 30-year peak, at less than $1 below $30 an ounce. It was silver’s biggest four-day rally since September, 2008, and volume was the heaviest since a record day in 1976.
“The heightened sovereign risk issues are just putting more and more uncertainty into gold, providing the fuel to lift gold higher along with the other precious metals,” said James Steel, chief commodity analyst at HSBC.
Gold rose in tandem with the US dollar for a second straight day, as investors poured into both the metal and the US currency as safe havens. Analysts said gold’s unsual positive link with the greenback was similar to what happened when sovereign debt fears were heightened earlier this year.
The euro struggled for a third straight session, swinging from gains to losses as investors worried about Irish and Portuguese debt and hedged sizable bets against the US dollar.
Gold has risen almost 8 per cent since just before the Federal Reserve detailed its plans last Wednesday to buy $600 billion worth of Treasuries to revive the economy, but the Fed’s actions also stoked inflation fears.
Spot gold scaled a record at $1,424.02 an ounce and rose 1.1 per cent to $1,423.79 an ounce at 1:06 pm EDT (1806 GMT). US gold futures also hit a record $1,422.10 an ounce.
Spot silver traded up 5.5 per cent at $29.21 an ounce. COMEX silver futures volume was at 122,000 lots, preliminary Reuters data showed, within striking distance to a record of 127,890 lots set in 1976.
The premium that investors are demanding to hold Irish and Portuguese government debt shot to record highs on concern about funding and potential default. This prompted European investors to seek a safe-haven investment such as gold.
“European investors are worried about the euro, real rates are very low and set to stay low for a long time, so the opportunity cost of investing in gold is tiny,” said Citi analyst David Thurtell.
“Lots of good reasons to buy it and not many to sell it,” he added.
Also on the radar is this week’s G20 summit. Officials from Germany, Brazil, China and South Africa are among those expressing concern that the Fed’s policy could weaken the dollar and drive up commodity prices.
If the G20 fails to defuse global tensions, it may heighten investor concerns that policymakers are drifting further apart, leaving the world economy vulnerable.
“There is a lot of uncertainty ahead of the G20 meeting. If there are no surprises we may see a correction afterwards,” said David Wilson, analyst at Societe Generale.
“Gold is using any excuse to go higher.”
Gold priced in euros has rallied by more than 7 per cent in the last five sessions, rising to its highest since late June this year.
“We have a combination: inflation fears, currency market uncertainty, fears about the financial strength of some countries,” said Alexander Zumpfe of Heraeus Metals.
Zumpfe said remarks by World Bank President Robert Zoellick that leading economies should consider readopting a modified gold standard, had also helped reignite interest in the precious metal.
Worries about price pressures grew last week when the Fed set its bond-buying program. This initially weakened the dollar and powered commodity prices higher. Gold has gained nearly 30 per cent this year so far.
Investor demand, which had slackened recently, picked up, as reflected by the first inflow into the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, since Oct 13.