LONDON (Reuters) - Gold hit record highs for a fourth day on Monday as speculation the Federal Reserve may announce further moves to stimulate the U.S. economy after its policy meeting this week piqued interest in the precious metal.
Spot gold hit a record $1,283.25 an ounce and was bid at $1,281.20 an ounce at 1429 GMT, against $1,275.95 late in New York on Friday. U.S. gold futures for December delivery rose $5.40 percent to $1,282.90 an ounce.
Concern over U.S. economic growth has sparked talk that the Fed may signal a move towards further quantitative easing, which could potentially prove inflationary.
It has also raised expectations that interest rates will stay low, undermining the dollar and cutting the opportunity cost of holding non-interest bearing gold.
“All the stories stack up hugely in favour of gold currently,” said Saxo Bank senior manager Ole Hansen. “A move higher to between $1,300-1,350 could be a good target towards year-end, but it will come in steps.”
The precious metal is likely to consolidate for the time being, he said, as investors await fresh news on the outlook for the global economy, and on U.S. monetary policy.
“For now, the potential is for us to step back a bit to test the strength of this recent rally, especially given all the positive news that is already in the market, and that the market has had a chance to react to,” he said.
Confidence in the U.S. recovery is fragile, with data on Friday showing Americans were at their most pessimistic in over a year this month as growing fears about job security and finances undermined U.S. consumer sentiment.
This has added to conjecture that the Fed may be considering further measures to stimulate economic growth.
“The pressure on the U.S. central bank is gradually building and such a move would be supportive for gold as monetary base expands further and the dollar weakens,” said Andrey Kruychenkov, an analyst with VTB Capital, in a note.
Spot gold prices have risen by more than 16 percent this year, driven by the desire among investors for a safe store of value in light of major currencies, equities and bonds becoming increasingly volatile.
Reflecting keen investor interest in bullion, the world’s largest gold exchange-traded fund, the SPDR Gold Trust, said its holdings rose another 6 tonnes on Friday.
Holdings of the world’s largest silver-backed ETF, the iShares Silver Trust, also rose on Friday, by 38.05 tonnes to 9,381.74 tonnes.
Silver prices, which have risen by 17 percent in the last five weeks alone, were less than 1.5 percent below their highest level in nearly 30 years on Monday.
Silver has acted as a cheap alternative to gold for investors who have sought out safe-haven assets in which to park their cash, but has also drawn strength from the modest recovery in global growth.
“Silver appears to be doing better than gold at the minute on the back of a combination, not just investment demand, but also industrial demand as the cycle improves for all the electronics companies,” said Natixis strategist Nic Brown.
Spot silver rose as high as $20.96 an ounce, after reaching $20.99 on Friday, its highest in the past 2-1/2 years. It was later at $20.84 an ounce against $20.76 late on Friday.
The platinum group metals rose in line with gold. Platinum hit its highest in four months at $1,631 an ounce, and was later at $1,626.50 an ounce against $1,610.55 on Friday. Palladium was at $541, against $539.88.