Gold rose to a record high for a second straight day on Wednesday, breaching $1,440 an ounce as political unrest in Libya and surging oil prices prompted investors to pile in. Unrest across the Middle East and North Africa, which unseated leaders in Tunisia and Egypt before spreading to Libya, Bahrain, Yemen, Oman and Iran, fuelled safe-haven buying on fears that tensions could flare across the entire region.
"You have political problems all over the world, a Federal Reserve bank that still erred on the side of easing rather than tightening, rising commodities prices in general, and growing disdain for fiat currencies generally," said Dennis Gartman, author of the Gartman Letter, an daily investment newsletter.
"It will be illogical for gold not to be going higher," he said. Two US warships were passing through the Suez Canal on Wednesday, heading for the waters off Libya to pressure that country's ruler, Muammar Gaddafi, to step down. Gaddafi launched a land and air offensive to retake territory from rebels in Libya's eastern region.
At a meeting of Arab foreign ministers in Cairo on Wednesday, Iraqi Foreign Minister Hoshiyar Zebari said the Libya crisis is an internal Arab affair and foreign powers should refrain from any intervention. Spot gold rose 0.4 percent to $1,439.19 an ounce by 12:00 pm EST (1700 GMT), after peaking at an all-time high of $1,440.10. The metal fixed at $1,435.50 an ounce in London.
US gold futures for April delivery rose $7.90 to $1,439.10. Gold is building on a 6 percent rise in February, its biggest one-month climb since August. Silver rose to a peak of $34.96 an ounce, its strongest level since early 1980. It later rose 0.4 percent to $34.79 an ounce.
Holdings in the world's largest silver exchange-traded fund, the iShares Silver Trust, rose to 10,693.68 tonnes on March 1, their highest since January 14. The trust reported a slight recovery in its holdings last month after they posted their biggest ever one-month fall in January. Platinum gained 0.9 percent to $1,855.49 an ounce and palladium climbed 0.4 percent to $817.47.
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