Gold rose above $1,390 an ounce on Friday, notching its best weekly performance since December, underpinned by fears over a European debt crisis, rising inflation and growing unrest in the Middle East.

Bullion’s gains sparked strong investment buying in silver, which soared to 31-year high, further widening silver’s gains over gold and sending the gold-silver ratio to its lowest level in 13 years.

“There is a big concern over the weekend that we can see some problems with the EU sovereign debt, in particular there are worries that Portugal may need a bailout very soon. Gold as a safe haven is certainly back in focus,” said Bill O’Neill, partner of commodities firm LOGIC Advisors.

The yield on five-year Portuguese government bonds hit a fresh euro lifetime high on Friday, after a euro zone source told Reuters the bloc is increasingly concerned about Portugal’s fiscal conditions and believed Lisbon will need to seek a bailout by April.

Gold also benefits as a safe haven as worries about the political stability of the region have flared this week, with unrest spreading after protests in Tunisia and Egypt unseated leaders there.

Spot gold rose 0.3 percent to $1,386.75 by 2:34 p.m. EST, having earlier hit a five-week high of $1,391.75. Bullion has risen in the five straight sessions, the longest streak since September. It gained almost 3 percent for the week.

U.S. gold futures for April delivery settled up $3.50 at $1,388.60 an ounce, with volume about 50 percent below its 30-day norm. That was in line with recent lower-than-normal turnover, a possible sign of dwindling trading interest.

Silver gained 2.1 percent to $32.42 after hitting a high of $32.86, its strongest level since 1980.

The gold/silver ratio — the number of ounces of silver needed to buy an ounce of gold — dropped to its lowest in 13 years at under 43 on Friday, Reuters data showed, as silver prices outperformed.

Silver’s rise was driven by short-term speculation and buying related to option hedging strategies, as the backdrop of an improving economy lifted the industrial metal, analysts said.

Investment demand for the largest silver-backed exchange-traded fund iShares Silver Trust has also shown signs of stabilizing after hefty outflows last month.

Barclays Capital said in a note it expects silver to continue to outperform gold, with silver trading as high as $37 an ounce.


Gold initially pared gains after China said it was raising lenders’ reserve requirements by 50 basis points but remained firmly underpinned by investment interest in precious metals.

“The hike in Chinese reserve requirements has clearly taken a back seat as the investor focus has been on developments in the Middle East, especially Bahrain,” said Pradeep Unni, senior analyst at Richcomm Global Services in Dubai.

Simmering tensions across the Arab are supporting gold, as thousands in Bahrain took to the streets on Friday and funerals were expected in two Libyan towns as both countries mourned victims of government crackdowns on protesters. Anti-government protests were also reported in Yemen.

Gold buying spiked this week after data showed U.S. core consumer prices rose 0.2 percent in January, the fastest pace in more than a year, indicating a long period of slowing inflation had run its course. Earlier this week, strong Chinese core inflation had also boosted gold.

The technical picture has also sharply improved this week, with prices breaching key resistance levels, including bullion’s 50-day and 100-day moving averages, analysts said.

Platinum dropped 0.5 percent to $1,832.99 an ounce, while palladium gained 0.8 percent to $847.72, having earlier touched a 10-year high at $855.47.

Prices at 2:21 p.m. EST


CLOSE CHG CHG CHG US gold 1388.60 3.50 0.3% -2.3% US silver 32.296 0.726 0.0% 4.4% US platinum 1843.30 -0.70 0.0% 3.7% US palladium 857.70 14.70 1.7% 6.8%

Gold 1387.80 4.50 0.3% -2.2% Silver 32.41 0.67 2.1% 5.0% Platinum 1832.24 -10.50 -0.6% 3.6% Palladium 846.72 5.75 0.7% 5.9%

Gold Fix 1383.50 -2.00 -0.1% -1.9% Silver Fix 31.94 133.00 4.3% 4.3% Platinum Fix 1836.00 3.00 0.2% 6.1% Palladium Fix 847.00 4.00 0.5% 7.1%


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