GOLD futures extended their recent rally on Friday in New York as the US dollar remained on the defensive.
The dollar's predicament enabled gold to hit a roughly two-month high despite some of the profit-taking by longs ahead of a three-day US Memorial Day weekend.
Some fund buying was reported, and pre-holiday trading conditions were described as light.
June gold rose $US7.70 to $US958.90 an ounce on the Comex division of the New York Mercantile Exchange. July silver added US25 cents to $US14.695.
"A lot of it has to do with the dollar right now," said Frank Cholly, senior market strategist with Lind-Waldock. "We're seeing the dollar down for the fifth consecutive day."
The euro got as high as $US1.4052, its most muscular level against the dollar since Jan. 2. The dollar index fell to a low of 79.805, its weakest level since December 29.
That helped June gold hit a peak of $US963.10, its highest level since the $US970 peak of March 20 that some traders had been listing as the next major chart resistance.
The dollar index, on a decline since early March, had now given up roughly half of its gain since July 2008.
"It's looking like the long-term dollar downtrend is re-exerting itself," said Peter Grant, senior metals analyst with USAGOLD - Centennial Precious Metals. And, he later added, the "classic hedge against a declining dollar and the likely inflation that comes from that is gold."
The metal is also drawing support from worries in the market that the rating for US debt possibly could be cut in the future, after Standard & Poor's indicated on Thursday that the UK's triple-A rating could be downgraded, said Cholly and Grant.
"Things really aren't improving despite the (stock) market's desire to latch on to every little bit of positive news," Grant said. "The reality is the economy is still struggling quite significantly. That was reflected in the FOMC minutes released this week from the April meeting."
Cholly said investors seemed to be "looking for any reason possible" to be buy silver and gold. For instance, the metals at times had drawn flight-to-quality buying when stocks weakened, yet at other times had firmed as stocks also rose on ideas that an improving economy may mean inflation down the road.
"I do not have hardly any customers looking to short gold and silver unless they're looking to hedge physicals," Cholly said. "No one wants to be short the metals. We're seeing mass amounts of long interest in the metals."
July silver, meanwhile, also benefitted from the soft dollar and maintained its recent technical momentum by breaking resistance at the Feb. 20 high of $US14.64. The contract peaked at $US14.86, its strongest level since August.
The metal is still playing "catch-up' to gold after silver pulled back much farther from its 2008 peak than did gold, Cholly said. Based on spot-continuation charts, gold was somewhere around 7% below its March 2008 peak, while silver was still some 30% below the March 2008 high.
"Gold has been holding stronger," Cholly said. "So when we see these bigger moves in silver right now, it's playing a little bit of catch-up."
Meanwhile, July platinum rose $US5.30 to $US1,160 an ounce. The metal followed gold and other commodities higher on the back of the weak dollar, a trader said.
June palladium, however, finished with a $US1.85 decline to $US233.65.
"People might think it's already over-inflated at $US230," the trader said. "Typically, it doesn't respond as quickly as the platinum and gold markets. But I bet early next week we start to see a bit of a movement upward on a catch-up."
