Gold prices hit a record USD 1,578.50 an ounce on Wednesday as concerns over the euro zone debt crisis deepened, and after minutes to the Federal Reserve's June meeting suggested some members were pondering the need for additional monetary easing.
Spot gold was up 0.6% at USD 1,574.29 an ounce at 1246 GMT. It has risen 11% so far this year and has more than doubled in price in the last four years.
Gold is set for an eighth consecutive day of gains, something it has not achieved since mid-October 2006, when it rose for nine days in a row.
"Gold will keep rising for the next five years, even if it has some crests and troughs," said Michael Widmer, an analyst at Bank of America-Merrill Lynch. "Those holding gold should hold onto it, while others should probably get their hands on it as it is going to be on an upward trend.
"The sovereign debt crisis is helping the gold prices rise but even if it is addressed in the short-term, the developed countries are in so much debt that it will continue to drive gold up for the next 10 years."
European Union leaders are expected to hold an emergency meeting on Friday after finance ministers acknowledged for the first time that some form of Greek default may be needed to cut Athens' debts and stop contagion spreading to Italy and Spain.
On the other side of the Atlantic, minutes of the Fed's last meeting showed some Federal Reserve officials believe further monetary policy easing could be needed if the recovery remains too sluggish to cut the stubbornly high US jobless rate and if inflation eases as expected.
"The debt crisis is if anything escalating, with ratings agencies now downgrading Ireland into junk territory. You have had rethinking on what should happen," said Credit Agricole analyst Robin Bhar.
"We'll know more about thinking on the US when Bernanke testifies, but it was interesting that the Fed, according to the minutes of the June meeting, seemed to bring about more thinking about quantitative easing... those Fed minutes seem to have stoked the fires (for gold)."
Fed chairman Ben Bernanke is due to testify on the U.S. economy and monetary policy before the House Financial Services Committee at 1400 GMT.
His comments will be closely watched for any clues as to a further round of quantitative easing, a key driver of gold's rally to record highs earlier this year as it kept US interest rates and the dollar low, cutting the opportunity cost of holding bullion, which bears no yield of its own.
Gold rallied to record highs in sterling and South African rand as well as dollars on Wednesday, and held near the last session's all-time high in euro terms.
Gold ETF holdings rise
Reflecting the heightened investor demand for metal, global holdings of gold in exchange-traded products witnessed their largest daily inflow since early April, driven by a hefty rise in holdings of metal in the SPDR Gold Trust , the world's largest gold-backed ETF.
Adding to worries about the euro zone debt crisis, Moody's cut Ireland's sovereign rating to junk status and warned of the likelihood of Dublin needing a second bailout, a week after it cut Portugal to junk.
"With European sovereign debt fears intensifying again, little clarity on what euro zone officials intend to do next and cross-asset market confidence taking a bashing, gold has been a beneficiary, much like the Swiss franc. And in this nervous environment, we prefer assets that have limited downside exposure - i.e. gold over other precious metals and commodities," said UBS strategist Edel Tully.
US gold futures for August delivery were up USD 12.90 an ounce at USD 1,575.20, also off a record USD 1,579.70.
Spot silver was last up 2.5% on the day at USD 36.95 an ounce, bringing the gold/silver ratio -- the number of ounces of silver needed to buy one ounce of gold -- to 43.06 from 43.46 on Tuesday.
Palladium, which depends largely on the Chinese car market as a source of demand for the metal in gasoline-powered vehicles, rose 1.4% to USD 772.47 an ounce.
Platinum echoed the strength in other industrial precious metals and rose 0.9% to USD 1,745.24.
