Gold rose as much as a percentage point as the dollar fell after US Federal Reserve officials made cautions comments on the outlook for interest rate hikes, while palladium hit a record high driven by worries about short supplies.
Spot gold rose 0.7 per cent to $US1,221.60 an ounce on Friday.
The session high was the highest since November 8 at $US1,225.29.
Gold gained over one per cent, its best week in five.
US gold futures settled up $US8, or 0.7 per cent, at $US1,223.
Two Fed officials cautioned that global economic growth was slowing.
The dollar fell to one-week lows against a basket of major currencies, making bullion cheaper for buyers in other currencies.
‘When you get people talking about the economy slowing down, they may not raise rates so quickly or as aggressively and that is bearish for the dollar,’ said INTL FCStone analyst Edward Meir.
Weaker global stock markets and lower US Treasury yields gave another leg for gold.
‘A weaker dollar and lower yields are pretty much tailor made to benefit gold,’ said James Steel, chief metals analyst at HSBC Securities in New York, who sees prices rising to $US1,245-$US1,250.
Palladium climbed 1.4 per cent to $US1,172.49 an ounce, up more than five per cent this week.
The metal hit a record high of $US1,185.40 earlier in the session, within a whisker of parity with gold for the first time in 16 years.
‘The market is in a big deficit. There is a lot of fund interest in palladium because the funds like to buy something when its moving… But the supply is of concern now,’ INTL’s Meir said.
Used mainly in emissions-reducing auto catalysts for vehicles, palladium, the only precious metal on track for an annual gain, was also helped by speculation Beijing may provide a stimulus to Chinese auto markets.
‘In the medium to longer term, I do not think these price levels are sustainable … also assuming we do get some sort of stimulus in China that pulls more and more demand into the present and weighs on the future demand outlook for the Chinese car market,’ said Julius Baer analyst Carsten Menke.
Car dealers in the world’s biggest car market have been pushing for Beijing to support the sector.
Silver rose 0.7 per cent to $US14.38 an ounce, on course for a weekly gain of over one per cent.
Platinum was up 0.5 per cent at $US844.90, but was down slightly for the week.