Gold rose over 1 per cent to a near-record and silver surged Thursday as dollar weakness, inflation worries and a European debt crisis powered bullion to its biggest one-day gain in about seven weeks.
Silver futures soared to their highest since 1980, rising more than 4 per cent for their biggest one-day gain since November, as strong investment and speculative buying sent the gold/silver ratio to a low.
Gold received a boost from inflation worries triggered by a crude oil rally and data showing rising U.S. core producer prices in March, and as higher-than-expected jobless claims knocked the dollar.
"The combination of higher oil prices, weaker dollar and the resurrection of discussions of Greek sovereign risk problems has galvanized the gold market. It's particularly impressive because we ran into selling above the market yesterday," said James Steel, chief commodity analyst at HSBC.
Spot gold rose 1.4 per cent to $1,474.30 an ounce by 4:02 p.m. ET, within striking distance of its record $1,476.21 set on Monday. U.S. gold futures for June delivery settled up $16.80 at $1,472.40 an ounce.
Investors grew jittery on talk of debt restructuring by Greece, the first euro zone member to receive a bailout a year ago in the crisis that has driven Ireland and Portugal to seek aid and forced draconian budget cuts in Spain.
The European debt crisis has boosted gold this year and also helped power the metal's 30 per cent gain last year.
Bullion investors took heart as the dollar fell broadly, reaching a record low against the Swiss franc, with more weakness likely so long as U.S. Federal Reserve and European Central Bank policies continue to diverge.
The recent surge in oil prices is no prelude to broader price increases that would force the Fed to raise interest rates, top Fed officials said Thursday in what appeared to be the predominant view at the central bank.
Comments by the Fed officials strengthened expectations the central bank will stay on course with its $600-billion debt-buying program and not look to reverse its super-easy monetary policy any time soon.
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.
SILVER RATIO LOWEST IN NEARLY 3 DECADES
Silver climbed 3.5 per cent to $42.03, having hit a 31-year high at $42.07 an ounce.
The spread between gold and silver - showing the relative strength between the two metals - has nearly halved since last August. The gold-to-silver ratio fell to just above 35, the lowest since the early 1980s.
"Silver continues to attract a very large speculative bid. Even though silver is far out-gaining gold, the reasons why precious metals rally are related to the financial factors that surround the gold market," said Bill O'Neill, partner at commodities firm LOGIC Advisors.
Silver has rallied about 35 per cent year-to-date on talk of near-term supply tightness as a recovering global economy boosts demand for the industrial metal.
"There is still a lot of speculative, investment money coming into the gold market. Until there is a clear technical signal that the situation is reversed, the momentum of silver remains intact," HSBC's Steel said.
Platinum gained 1.2 per cent to $1,791.24, while palladium rose 1.4 per cent to $771.50.