Gold rose 1 percent to a record and silver soared on Friday, as inflation worries amid a crude oil rally and a downgrade of Ireland's sovereign debt powered bullion to its fifth consecutive weekly gain.
Silver rose to its highest in 31 years on speculative buying and tight supplies, and as data showing rising U.S. consumer prices prompted investors to buy precious metals. Silver's outperformance over bullion sent the gold/silver ratio below 34 for the first time in nearly 30 years.
"People are buying gold and silver as a protection against inflation. If the Fed doesn't start raising rates, inflation is really going to hit hard and cripple the economy," said Miguel Perez-Santalla, vice president of sales at Heraeus Precious Metals Management.
Spot gold rose 0.9 percent to $1,485.70 an ounce by 3:28 p.m. EDT, having hit a record $1,487.90. U.S. gold futures for June delivery settled up $13.60 at $1,486.
Gold remained far below its all-time inflation-adjusted high, estimated at almost $2,500 an ounce set in 1980, an era of Cold War tension, oil shocks and hyperinflation.
Silver gained 1.4 percent to $42.68, notching a third straight weekly gain. The gold-to-silver ratio, showing the relative strength between the two metals, fell to its lowest since the early 1980s.
In the week ended April 12, speculators in U.S. gold futures and options cut their net long positions from the highest level since October, and they reduced their silver bullish bets to the lowest since February, a report by the U.S. Commodity Futures Trading Commission showed.
The small rise in U.S. core inflation, and data showing moderation in long-term inflation expectations may be seen as vindication for Federal Reserve officials who have viewed the recent energy price spike as having a temporary effect.
"This should help to ease inflation concerns at the Fed. With food and energy cutting into consumer spending power, it's difficult for sellers of other goods and services to pass price increases through to the consumer," said Nigel Gault, chief U.S. economist at IHS Global Insight.
Gold prices have almost doubled since the Fed cut interest rates to the bone in 2008 in an attempt to shock the economy back to life after the worst financial crisis since the Great Depression.
A third straight daily gain in U.S. crude oil stoked inflation worries, as improving consumer confidence and industrial production boosted the outlook for oil demand.
EUROPEAN DEBT CRISIS EYED
Gold also drew support from safe-haven bids on worries over the euro zone financial crisis, after more talk that Greece may be set to restructure its debt and a Moody's downgrade of Ireland.
"The market has been reacting to (the credit issues in peripheral Europe) by looking for ways to protect themselves from these types of risks, and gold is seen as a way to do that," Deutsche Bank analyst Daniel Brebner said.
Brebner said gold would benefit if there were another bailout in Europe and if European Union monetary policy remained accommodative because of fiscal troubles in the bloc.
Among other precious metals, platinum eased 50 cents at $1,785.99 an ounce, while palladium gained 0.4 percent to $765.22.
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