London
Amanda Cooper, Jan Harvey
RTGAM
London - Gold rallied to a fresh record high on Thursday in its longest string of gains in 10 months, against a backdrop of a wilting dollar, Middle East violence and growing chances of a Portuguese bailout.
Spot gold hit a record high of $1,447.40 an ounce, up by 0.8 per cent on the day in its seventh successive day of gains, the longest such stretch since May last year, when the euro zone debt crisis began to unfold.
Much of the momentum came from options-related trading, but the demand from investors for perceived safe-haven assets, especially after Japan's disastrous earthquake and violence across the Middle East and North Africa, is expected to remain.
Concerns over euro zone sovereign debt, a key factor pushing gold to record highs last year, returned to the spotlight following the resignation of Portuguese Prime Minister Jose Socrates late on Wednesday after opposition parties refused to support his government's latest package of austerity steps.
"With all that is going on in the Middle East and also with this Portuguese problem ... that will obviously bring more safe-haven buying. If you look at gold in euros, that is ticking higher as well," said MKS Finance head of trading Afshin Nabavi.
Gold priced in euros pared some of the day's losses to trade down 0.1 per cent at €1,018.53 ($1,443.81 U.S.) an ounce.
Mr. Socrates' resignation lifted expectations that Lisbon will seek emergency funding. He is attending a two-day European Union summit in Brussels on Thursday and Friday, and there has been speculation that he could ask for a bailout there.
"It seems almost unavoidable that Portugal will have to tap into the EU rescue fund (EFSF)," said Commerzbank in a note.
"The latest events overshadow the EU summit in Brussels today and tomorrow, as a 'convincing and comprehensive solution' to the debt crisis, as EU Commissioner Rehn has repeatedly promised, seems very unlikely," the bank added.
"It is even questionable whether the heads of government will agree on the minimum target - increasing the EFSF (EU rescue fund) volume," it said. "Gold and silver are likely to profit further accordingly."
The euro meanwhile recovered from an early slide as expectations of a rise in euro zone interest rates next month temporarily overshadowed news from Portugal. A consequently stronger dollar also supported spot gold prices.
