Gold powered to a record high at $1,300 an ounce on Monday as investors poured cash into the market on worries about global economic health and the possibility of further quantitative easing to stimulate growth.
Silver, often considered the poor man's gold, rose to a 30-year high as investors also chased a cheaper alternative. The metal has gained nearly 30 percent this year.
Fund managers and industry experts say gold's rally has further to run in the longer term because it provides a hedge against inflation amid expectations that central banks worldwide could resort to quantitative easing to support economies.
Spot gold firmed to $1,296.45 an ounce by 1610 GMT, after hitting a historic $1,300 an ounce and versus $1,295.60 quoted late in New York on Friday.
"Momentum is still very much in favor of gold," said Jesper Dannesboe, senior commodity strategist at Societe Generale. "I wouldn't dare go against it and definitely wouldn't want to be short. There's good appetite to buy," he said.
Bullion's rally accelerated last week after the U.S. Federal Reserve signaled its readiness to pump billions of dollars into the economy through purchases of government debt, a process known as quantitative easing.
"Every country in the world is giving signals that it could print money ... what else are you going to trust apart from gold," said Sean Corrigan, chief investment strategist at Diapason Commodities Management.
The Fed's statement hit the dollar, which dropped on Monday to a five-month low versus the euro, offering further support for gold.
U.S. gold futures for December delivery rose to $1,300.10 an ounce, within sight of an all-time high at $1,301.60 hit on Friday.
Industry experts see fresh highs for bullion. Delegates at the London Bullion Market Association annual conference forecast a price of $1,406 an ounce by September 2011.
Barrack Gold, the world's biggest miner of the yellow metal, said bullion could exceed $1,500 an ounce next year.
Central banks' capping their gold sales could be another factor supporting prices. On Monday Germany's Bundesbank said it would keep its gold sales to a minimum in the next 12 months.
For the shorter term, charts show the bullion rally might face resistance at around $1,315-1,325 an ounce.
"I wouldn't call it a safe trade, because everyone has it now," Dannesboe said. "It's been running for quite some time. I believe a correction is due."
A potential correction could be limited, traders said, with the physical market still buoyant despite record high prices.
"There is buying even today despite gold touching $1,300 as the rupee is in a supportive mode," said Pinakin Vyas, assistant vice-president with IndusInd Bank. "The buying momentum would continue on upcoming festivals."
Silver jumped to its highest in three decades at $21.61 an ounce.
"The medium-term outlook for silver remains positive in our view and we therefore raise our medium-term price target to $25 an ounce," said metals strategist Michael Widmer at Bank of America Merrill Lynch in a research note.
The world's largest silver-backed exchange-traded fund, the iShares Silver Trust, said its holdings rose to a record high at 9,613.02 tons by Sept 24 from 9,582.59 tons on Sept 23.
Silver's main sources of demand are for use in industrial applications such as semi-conductors and jewelry. Spot platinum was at $1,629 an ounce versus Friday's last quote of $1,637.70 an ounce, while spot palladium was at $558 an ounce versus $556.70 an ounce.
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