Gold extended gains to a three-month high on Friday, supported by a weaker US dollar and bullion's appeal as an inflation hedge on rising oil prices and aggressive fiscal spending steps by major governments.
Gold hit a three-month high of $US966.80 an ounce as the US dollar fell towards a five-month low versus a basket of currencies, with worries over soaring government debt prompting investors to sell the safe-haven currency.
Spot gold was recently bid at $US966.40 an ounce, against $US958.80 an ounce late in New York on Thursday.
"Gold seems to be getting support from oil, as high oil prices can lead to fears of inflation," said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
"Oil and gold might move together at times as both are seen in some way as a real commodity investment," he said.
US gold futures for August delivery inched up 0.2 per cent to $US964.80 an ounce, compared to $US963.20 an ounce on the COMEX division of the New York Mercantile Exchange.
Some traders said gold's latest strengthening may not have a direct link to heightening geopolitical risks in Asia.
South Korea and the United States raised the military alert level for the Korean peninsula on Thursday after the communist North warned the truce ending the Korean War was dead and it was ready to attack.
Investment into gold-backed exchange-traded funds has stalled for a four straight session, as holdings at the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, remained unchanged at 1118.76 tonnes as of May 28.
Reuters
