Gold jumped 3% to a 6-1/2 month high on Wednesday as risk aversion prompted investors to buy gold and bullion-backed exchange-traded funds as a haven.
Caesar Bryan, portfolio manager of the $US350-million GAMCO Gold Fund, said the rally was a "catch-up" move from the previous session when disappointing investors sold stocks after the US government unveiled a massive US bank rescue plan.
"There has been a step-up in investment demand as evidenced by the GLD," said Bryan, referring to the world's largest gold ETF SPDR Gold Trust , which has since the beginning of the year jumped about 115 tonnes to 895 tonnes as of Feb. 10.
Spot gold was at $US939.75 an ounce at 3:15 p.m. EST (2015 GMT), up 2.8% from the last trade $US914.15 late on Tuesday.
Spot bullion prices pushed through tough resistance at just above $US930, spiking to a peak of $US953.30 in ultra thin volume after the London trading session ended.
US gold for April delivery settled up $US30.30, or 3.3%, at $US944.50 an ounce on the COMEX division of the New York Mercantile Exchange.
"There was a lot of disappointment behind the package, either because the measures weren't concrete enough or because they thought they hadn't tackled the root cause of the problem," said BNP Paribas analyst Michael Widmer.
"A lot of investors reassessed the risk in the market, and as risk aversion increased, it helped prices."
The United States on Tuesday rolled out a revamped bank rescue plan that may cost more than $US2 trillion. Stocks slid by the most in two months after the plan was unveiled, while gold climbed 2% as investors sought safety.
CMC Markets strategist Ashraf Laidi said doubts about the US plan to shore up banks and the economy had led to fears of an escalation of debt issuance.
"This combination of further debt escalation with a lack of any economic result is further fortifying gold's ascent," he said.
In official gold sector news, the International Monetary Fund said it does not intend to alter plans to sell just over 400 tonnes of gold to fund changes to its financing base.
Africa's top gold producers were upbeat on gold's outlook at this week's annual African mining conference. Experts say the metal could rise above $US1,000 an ounce this year.
But the world's No. 4 gold producer, Gold Fields, plans to cut as much as 10% of its workforce through voluntary layoffs, a union official said.
Silver rose to $US13.51 an ounce, up 3.1% from its previous close of $US13.10.
The metal has also benefited from ETF inflows. Holdings of the largest silver-backed ETF, the iShares Silver Trust, rose 1% to a record 7,606.89 tonnes on Monday.
Among other precious metals, platinum extended Tuesday's gains to end at $US1,067.50 an ounce, up 3.4% from its last finish of $US1,032, while palladium was at $US212.50 an ounce, up 1.2% from its previous close $US210 on Tuesday.