Gold jumped to its highest since mid January on Friday afternoon in Europe on a combination of fund buying, supportive currency moves and international tension, dealers and analysts said.
Silver chased gold up, making a fresh six-year peak at US$7.76 an ounce as the funds spread out their purchases.
"The consensus seems to be that the move above the previous high [US$420.25 on gold] triggered some stops, with little selling around," HSBC metals analyst Alan Williamson said.
The euro pushed briefly above US$1.2200 against the dollar, after softer than expected February US consumption data. A stronger euro makes dollar-priced gold cheaper for European investors.
The single currency later fell when Deutsche Bank said that it now believes the European Central Bank will trim interest rates within its next three policy meetings by 25 basis points, but bullion managed to hold the bulk of its gains.
Spot gold closed at US$421.10/421.60, after hitting a high of US$422.80, last seen in mid January. That compared with New York's last quoted level on Thursday of US$416.50/417.25.
"Although we've had a decent move up, and we thought the market might have been entering a bit of a consolidation phase, the funds themselves are still rather underweight gold," Williamson said.
Bullion is now less than US$10 away from the 15-year peak scored in early January at US$430.50, when the euro surged against the dollar.
But safe-haven buying of gold has loosened the link between bullion and currencies amid a stream of global security incidents this week including Israel's assassination of the Hamas militant group's spiritual leader Sheikh Ahmed Yassin.
A bomb was found on one of France's main rail lines on Wednesday, giving another reason to buy gold as portfolio insurance. And on Thursday Dutch officials briefly evacuated Amsterdam's central rail station due to a bomb threat, but later said they had found nothing.
An FBI warning that Texas oil refineries could be attacked was shaken off in New York trading on Thursday, while on Friday an Air France flight from Pisa to Paris was forced to land in Milan after a suspicious piece of baggage was found on board. The airline later said it was a false alarm.
"Gold has broken the dominant influence of the euro, and is now being affected by a broader range of currencies [particularly the yen], economic and equity market concerns, as well as the general climate of geopolitical uncertainties," Barclays Capital said in a daily report.
In other precious metals, silver popped higher on the back of gold's gains, with the market scoring a fresh six-year peak at US$7.76 -- raising expectations for it to reach the February 1998 peak of US$7.90. It was last quoted at US$7.68/7.70 compared with US$7.58/7.60 previously.
Also on Friday, a company source at Russia's Polimetall said it will sell 200 tonnes of silver in April under direct contracts to Western Europe and Dubai in the first direct export sale by a Russian metals firm.
"The metal will go to banks and companies in London, Zurich and also Dubai. We also plan to sell 600kg of gold as part of this sale," a company source said, adding that the entire sum of the contracts will be US$55.8 million dollars, the market price for the metals as of March 25.
Analysts said that the sale was not expected to have much impact on the market.
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