Silver surged 3 percent and platinum group metals also rose sharply on supply concerns due to labor unrest in South Africa.
Precious metals received a boost after sources told Reuters Spain is in talks with the euro zone over conditions for international aid to bring down its borrowing costs, even though the country has made no final decision to request a bailout.
Bullion rallied for a seventh consecutive day, consolidating its breakout above the top end of a four-month trading range at $1,640 and technical resistance at the 150-day and 200-day moving averages.
The move higher came amid already-bullish market sentiment, with Wednesday's minutes from the US Federal Reserve's August meeting showing policymakers were ready to deliver more stimulus "fairly soon" unless the economy improves considerably.
"This is the first insight we've gotten in the marketplace to think that the Fed is committed to this new stimulus program, and that's the catalyst you need to break out of the range," said Jeffrey Sherman, commodities portfolio manager at DoubleLine Capital LP.
"The reason gold is the choice asset is because of the inflation fears. If the central banks are going to print money, that should ultimately devalue other assets," said Sherman, whose firm has over $40 billion in assets under management.
Spot gold gained 1.1 percent at $1,671.76 an ounce by 12:13 p.m. EDT (1613 GMT), having risen 3.5 percent so far this week.
That put gold on track to post its largest monthly rise since January's 11 percent increase.
US gold futures for December delivery were up $33.80 at $1,674.30 an ounce. Trading volume looked set to hit its highest in a month, preliminary Reuters data showed.
Silver rose 2.8 percent to $30.68 an ounce.
Gains in industrial metals also underpinned gold. Bullion broke ranks with US equities, which fell after the release of jobless claims data.
The number of Americans filing new claims for jobless benefits unexpectedly increased last week, suggesting the labour market is healing too slowly to dent the unemployment rate.
Gold has more than doubled in value since the Fed first resorted to buying Treasuries to pin down interest rates and encourage growth in late 2008. This year, it has struggled to remain in positive territory in the absence of any clear commitment from the US central bank to resume the practice.
Among platinum group metals, platinum rose 1.5 percent to $1,553.25 an ounce and palladium was up 3.7 percent at $651.75 an ounce.