NEW YORK (Reuters) - Gold prices rose to within $10 of their all-time high on Friday as investors sought refuge from financial market uncertainty and currency depreciation ahead of a closely watched G20 meeting.
Friday's gains lifted the metal within striking distance of the record high $1,264.90 set Monday on euphoria related to China's vow to relax the yuan, but the rally was short-lived and bullion snapped a four-week winning streak
Markets were watching the cost of protecting Greek government debt against default, which rose to a record high on Friday. Investors were also piling into gold due to a global equity market slump.
"Sovereign risk has attracted establishment money into gold, which tends to be long-term money. It's about adding safe-haven security to portfolios. In the next few weeks you might see profit-taking, but the trend is solidly upwards," said VM Group analyst Jessica Cross.
On the other hand, some financial market uncertainty ebbed after an agreement by U.S. lawmakers to overhaul financial market regulation on Wall Street. U.S. stocks turned higher late in the session on a bank shares rally.
Spot gold was at $1,253.85 an ounce at 3:05 p.m. EDT (1905 GMT), up from $1,244.05 an ounce late in New York on Thursday. The metal earlier hit a session high of $1,257.65 an ounce. U.S. August futures settled up $10.30 at $1,256.20 an ounce.
Late-session gains in the euro against the dollar and a crude oil rally stirred by the possibility of an Atlantic tropical storm developing also powered gold's gains.
Data released earlier showing the U.S. economy expanded at a 2.7 percent annual rate in the first quarter, instead of the 3 percent pace reported last month, also gave gold support by increasing its safe-haven appeal.
Traders said that gold could retest record highs on possible developments out of the Group of 20 summit this weekend. Disagreements about the best way to ensure growth and fiscal responsibility could add to gold's appeal.
FED PLEDGES ON LOW INTEREST RATES
Gold over the past couple of years has benefited from perceptions that governments were quietly trying to depreciate their currencies to help boost exports and growth.
"Nobody is giving up on gold. There is too much uncertainty in the world," said Andrey Kryuchenkov, an analyst VTB Capital. "Gold is trading like a currency. People are not ready to liquidate their holdings. They are using price dips as buying opportunities. That was the case at $1,230 support."
Earlier this week the Federal Reserve acknowledged the faltering pace of recovery in the United States, the world's largest economy, and renewed its pledge to hold interest rates at very low levels for a long time.
The Fed's statement dampened dollar sentiment, which boosts demand for gold. Low or zero interest rates also mean there is no opportunity cost for holding gold, which earns no interest or dividends.
And that explains why holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose to a record high at 1,316.177 tonnes as of June 24 from the previous high of 1,313.135 tonnes on June 22.
On market fundamentals, news that Russia's total gold output, including scrap, fell 6 percent year-on-year in the period from January to May improved overall sentiment.
James Steel, chief commodity analyst at HSBC, said the news highlighted the difficulties in raising gold output in many producing nations, which is an important supportive factor in the metal's bull market.
Spot silver was at $19.03 an ounce, up from $18.65 late in New York on Thursday. Platinum was at $1,565, up from $1,557.50, and palladium was at $476.50, up from $471.