Gold extended its rally above the key $2,000 an ounce level on Wednesday, hitting a fresh record high as a weakening dollar and falling returns on U.S. bonds added fuel to a buying spree among investors looking for a safe store of value.
With the coronavirus pandemic roiling markets, gold has now surged 34.5% this year and is one of 2020's best performing assets.
After breaking above $2,000 for the first time on Tuesday and hitting a new high of $2,041.33 an ounce earlier on Wednesday, spot gold was up 1.1% at $2,040.50 by 1020 GMT.
U.S. gold futures climbed 1.8% to $2,056.30.
"There's a level of fear in the markets which is almost palpable," said independent analyst Ross Norman. "Momentum is feeding on itself, based upon real concerns about the failure of the macro economy to show any meaningful signs of recovery."
Silver prices also surged, jumping 3.2% to $26.84, the highest since April 2013. Silver, which is both a safe-haven asset and widely used in industry, has now risen 50% this year, outperforming even gold.
Investors fear that economic stimulus unleashed in response to the coronavirus pandemic will trigger inflation, devaluing other assets, and keep bond yields historically low, enhancing the appeal of non-yielding gold.
Inflation-adjusted U.S. 10-year yields have fallen from 0.15% to below minus 1% this year .
As the coronavirus has now infected more than 18 million people worldwide and the outlook for the global economy remains cloudy, many analysts think gold will rally further, with Bank of America saying it could reach $3,000 over the next 18 months.
The dollar has weakened to multi-year lows and fell again on Wednesday as Washington remained deadlocked over a relief package.
The rally remains vulnerable to pullbacks, said Carsten Menke, an analyst at Julius Baer.
"It's clear for us that the insurance gold provides to an investor's portfolio has become very expensive and that the market at current levels is suited for short-term traders rather than safe-haven seekers."
Technical analysts also warn that gold needs a period of consolidation.
Elsewhere, platinum rose 1.4% to $950.29 and palladium was 0.6% higher at $2,151.02.
(Reporting by Arpan Varghese in Bengaluru, Peter Hobson in London; editing by Kirsten Donovan) ((firstname.lastname@example.org; +91-80-6182-2823 / 3590 (If within U.S. call 651-848-5832 ); Reuters Messaging: email@example.com))