Gold prices rose more than 1 percent on Tuesday to within a dollar of their record high, and silver hit a 31-year peak, as chaos in Libya and political turmoil in the Arab world prompted safe-haven buying.
"What gold needed was a catalyst, and it found it in the form of tensions that are surfacing in the Middle East and rising oil prices, which served as an inflationary threat and also led to political instability," said Mark Luschini, chief investment strategist of Janney Montgomery Scott, a brokerage that manages $53 billion in client assets.
Gold has rallied strongly since political unrest sent oil prices to 2-1/2 year highs, which stoked fears of inflation and the possibility of high energy prices stalling economic growth. Spot gold rallied to a session peak of $1,430.70 an ounce - its highest since Dec. 7, when it hit a record $1,430.95. The metal gained 1.3 percent to $1,429.80 an ounce by 1:28 p.m. EST (1828 GMT), extending its winning streak to three consecutive trading days.
US April gold futures rose 1.3 percent to $1,428.8 an ounce. Bullion rose 6 percent in February, its largest monthly rise since August. It traded mostly sideways last week, then gained on Tuesday on resurgent safe-haven bids. Silver hit a fresh 31-year high at $34.57 an ounce and later climbed 1.9 percent to $34.46. Silver has risen about 11 percent this year.
The gold-silver ratio, which shows how many ounces of silver it takes to buy one ounce of gold, approached a 13-year low. Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee on Tuesday that the recent surge in oil prices was unlikely to have a big impact on the US economy, but could dampen growth and raise inflation if sustained.
Since the Fed cut interest rates to 0.25 percent in response to the global financial crisis in late 2008, gold has risen 70 percent. In a reflection of investor ambiguity on gold, holdings of the metal dropped in the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund. Holdings fell for a fifth consecutive month in February, marking its worst string of declines since the creation of the fund in 2004. Platinum gained 1.8 percent to $1,837.49 an ounce, while palladium climbed 2.6 percent to $814.80 an ounce.
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