So far this year bullion has gained nearly 40 percent — driven by central bank buying, paper currency depreciation and inflation worries — as governments flooded the system with money to jolt the economy out of recession.
The metal also reached all-time highs in euro, yen and sterling terms, according to Reuters data, indicating independent gold strength.
COMEX gold floor trader Mihir Dange said that a significant amount of buying was necessary to drive the gold market to successive record highs.
«What's really driving gold is a lot of institutional and hedge fund buying. A lot of people are just saying, 'We are going to allocate 5 percent of our portfolio to the gold,'» Dange said. Spot gold hit a record $1,212.40 an ounce and was at $1,212.50 at 3:28 p.m. EST against $1,196.00 late in New York on Tuesday.
Bullion has risen 17 percent since the start of November. U.S. February gold futures settled up $12.80, or 1.1 percent, at $1,213 an ounce on the COMEX division of NYMEX. Investment sentiment is particularly bullish after news that large fund managers John Paulson and Paul Tudor Jones are joining other big names to buy gold, and expectations that central banks from emerging countries would continue to acquire bullion.
Bullion holdings of the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, rose to 1,130.604 tonnes on Tuesday, near the record 1,134.03 tonnes hit in June.
«There's a lot of passive investment, long-only money coming in every month, and this is a continuation of the pattern we've seen every month this year," said Lars Steffensen, managing director of Essex-based Ebullio Capital Management.
Although the dollar held broadly firmer against the euro and other major currencies, fund managers and analysts said low U.S. interest rates plus fiscal and monetary stimulus would keep the dollar on the back foot and gold well supported.
Traders said options-related activity was also lifting gold towards fresh peaks. „At these levels the option strikes are the main focus," said Simon Weeks, head of precious metals at the Bank of Nova Scotia. «Yesterday, there was a struggle around $1,200, and now that we are above there, there will be an increasing pull towards $1,250.“
CENTRAL BANK BUYING
Speculators are betting on further buying by central banks, particularly in Asia, after many years of net official sector sales. India's purchase of 200 tonnes of gold, announced in November, sparked a 13 percent price rally that month.
«We believe that a key fundamental supporting factor for gold is the continuing shift of central banks and governments from being net sellers of gold to net buyers," said Daniel Sacks, portfolio manager of the Investec Global Gold Fund.
Platinum also shot to its highest since August 2008 at $1,506.50 an ounce. Silver and palladium hit their highest levels since July last year.
Spot silver was at $19.20 an ounce against $19.07, and palladium at $386.50 against $380. Spot platinum was at $1,495 an ounce against $1,478.50.