Gold prices vaulted 3 per cent Thursday to near an all-time high, topping $1,200 (U.S.) an ounce in the biggest one-day gain in more than a year as financial turmoil in Europe accelerated the flight to safety.
After trading modestly higher through most of the day, gold prices surged in mid-afternoon, passing the $1,200 mark for the first time since Dec. 4 as stocks plunged. The Nasdaq at one point was down more than 9 per cent and the S&P 500 briefly fell into negative territory for the year.
Gold and other safe-haven assets have benefited from mounting worries about contagion from Greece's debt problems.
But the scale and degree of the midday collapse took most traders and analysts by surprise.
"Gold is yet another currency...but it does not have the debt issue. It's not just a Greek problem, not just a European problem, but a global problem," said Axel Merk, president of California-based Merk Mutual Funds, which has $550 million fund assets.
"Gold is one way that investors can try to diversify in a world where there are no risk-free assets any more."
Spot gold rose as high as $1,207.45 an ounce, its firmest since Dec. 4 and its fourth rise in the last five trading sessions.
It was at $1,208.55 an ounce at 3:30 p.m. EDT , up 2.9 per cent from $1,174.20 late in New York Wednesday, its biggest rise since February last year.
U.S. gold futures for June delivery on the COMEX division of the NYMEX were up $34, or 2.9 per cent, to $1,209 an ounce. Earlier, June settled at $1,197.30 an ounce.
Gold priced in euros, in Swiss francs and in sterling all hit record highs, underlying the metal's strength with rising currency volatility. Meanwhile, strong investment interest boosted holdings of the biggest gold-backed exchange-traded fund to an all-time peak.
Gold prices tend to rise in times of economic and geopolitical crises.
"Despite the ECB being confident that default for Greece is 'out of question', the market seems to be nervous," said Pradeep Unni, senior analyst at Richcomm Global Services.
"At this point in time, it is becoming evident that investors are hedging the recent euro zone and UK crisis equally in gold and the U.S. dollar," he said.
Waning confidence in euro-zone sovereign debt markets and currencies has boosted gold, traders said.
Euro zone states are finalizing details of a €110-billion aid package for Greece, which is struggling to implement austerity measures attached to the aid.
Despite gold's rally, Morgan Stanley said in a note, "We see further upside from current levels."
Gold hit a record high of $1,226.10 last December.
Investment demand for bullion has been strong, with the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, reporting a rise of seven tonnes in its holdings to a record 1,166.002 tonnes on Wednesday.
The more industrial precious metals - silver, platinum and palladium - rebounded Thursday after selling off with most other commodities on Wednesday as risk aversion soared.
Platinum was at $1,634.50 an ounce, having earlier climbed 3 per cent to $1,682 an ounce against $1,625 on Wednesday.
Meanwhile palladium was at $498 against $501.50 and silver was at $17.39 an ounce versus $17.43.