Gold jumped to a record high for a fifth straight trading day on Monday as the prospect of more declines in the US dollar drove investors into the precious metal, with record exchange traded fund holdings helping silver to its highest in more than three decades.
Heightened inflationary threats despite interest hikes by China and the European Central Bank boosted gold's safe haven appeal, while silver also attracted buying from investors looking for a cheaper alternative to bullion. The gold-to-silver ratio was at a 28-year low around 35.
Spot gold added USD 1.35 to USD1,474.05 an ounce by 0539 GMT, having risen as high as USD 1,476.21 after the euro jumped to a 15-month high against the US dollar.
"I think there is a good chance that gold could hit USD 1,500 an ounce within this quarter. And perhaps even higher if we see the weakness in the dollar persist and the Federal Reserve continues their relatively easy monetary policy," said Ong Yi Ling, investment analyst at Phillip Futures in Singapore.
"This week, perhaps, the focus could be on whether the Federal Reserve actually indicates to the market whether they will be exiting their loose monetary policy, and whether they display any hawkish signals."
Gold has gained more than 10% since late January when political unrest began to flare in the Middle East and North Africa.
But Monday's gains could be capped by a drop in energy prices. Brent crude fell below USD 126 after the African Union said Muammar Gaddafi has accepted a roadmap to end the civil war in Libya, including an immediate ceasefire in the North African producer.
The metal is still far below its all-time inflation-adjusted high, estimated at almost USD 2,500 an ounce set in 1980, an era of Cold War tension, oil shocks and hyperinflation.
Spot gold is heading towards USD 1,518 per ounce based on its wave pattern and a Fibonacci projection analysis, according to Wang Tao, a Reuters market analyst for commodities and energy technicals.
Spot silver rose as high as USD 41.93 an ounce, its strongest in 31 years. IShares Silver Trust said its holdings hit another record at 11,242.89 tonnes by April 8 from 11,192.80 tonnes on April 7.
The dollar dipped against a basket of currencies, weighed by positive signs for investor risk-taking, and remained stuck near last week's 16-month low versus a basket of major currencies.
The ECB raised rates by 25 basis points at its April meeting last week and signalled it was ready to tighten further if needed to check rising prices, but in contrast, both the Fed and Bank of Japan are expected to keep interest rates near zero for an extended period of time.
Janet Yellen, Fed Vice Chair, said on Saturday the U.S. economy is still not strong enough for the Fed to start reversing its extremely accommodative monetary policy.
NY Fed chief William Dudley speaks later on Monday and should also sound dovish.
U.S. gold futures for June rose USD 2.5 to USD 1,476.6 an ounce after rising to a record at USD 1,478 an ounce.
The physical sector saw selling from Thailand and Indonesia, but volume was light as holders waited for more gains in gold prices before cashing in. Premiums were steady at between 70 cents and USD 1 an ounce to the spot London price in Singapore.
"Selling started last week, but I don't think the quantity is huge. Thailand has quietened down a bit and I think because people are still bullish about gold," said a dealer in Singapore.
"My premiums are unchanged at 70 cents," he added.
Another Singapore-based dealer said selling picked up from Indonesia on Monday, but it had little no impact on premiums.
"I sold my last deal into Thailand at 80 cents, so I presume the premiums are about there," he added.
In other markets, the Nikkei edged lower after Citigroup slashed its ratings on major automakers to "sell", although buying of reconstruction-related stocks supported the market.