NEW YORK/LONDON (Reuters) - Gold extended its record-breaking rally on Wednesday, rising above $1,310 an ounce while silver hit a 30-year peak, as the dollar hit a five-month low against the euro on growing expectations of more U.S. monetary easing.
Gold's strength also lifted other precious metals, with palladium hitting its highest level since March 2008 and platinum a four-month high.
The yellow metal has now hit its 10th record high in the past 12 trading days, spurring hedge fund manager Dennis Gartman to warn of an hyper-extended gold market and advise his clients to avoid buying and to unload their long positions.
Spot gold hit a record $1,313.20 and was up 0.2 percent at $1,309.85 an ounce at 2:07 p.m. EDT (1807 GMT). U.S. gold futures on the COMEX division of the NYMEX for December delivery settled up $2 at $1,310.30 an ounce.
COMEX gold's open interest rose to new record at 619,408 lots on Tuesday. In addition, COMEX estimated final gold volume at 117,500 lots, about 3 percent higher than its 30-day average, preliminary Reuters data showed.
The price of gold has rallied by 5 percent in September, on track for a second month of increases, and while analysts are expecting to see some sort of pull-back, further gains appear to be on the cards.
"Essentially, it feels like we need to consolidate a bit. However, there are a lot of people thinking that, but very few are willing to short the market," said Credit Suisse analyst Tom Kendall.
"It's quite possible that if there are any further upsets in either the currency markets or the rates markets ... we could get another leg higher and then we'd be looking at the next upside target at $1,330," he said.
The dollar fell for a fourth straight session to hit a new five-month low against the euro as broadly weak economic data reinforced the belief the U.S. Federal Reserve could resume its purchases of Treasuries to keep interest rates low.
"Gold is flying because of concerns over a weakening dollar, and the prospect of quantitative easing," said David Wilson, an analyst at Societe Generale.
"We are not convinced the European economy is going to be doing particularly well next year either," he added. "It is going to be a kind of competition (to show) who will be worse out of the two."
CitiFX strategists said that gold is now in sight to reach $1,340 based on a bullish outside reversal day on Tuesday and a reverse head-and-shoulder chart pattern.
Independent investor Dennis Gartman said that investors should avoid holding more than 5 percent of their liquid assets in the gold market.
"We cannot strongly enough urge everyone to avoid buying gold here and we shall go so far as to suggest that those who are long begin the process of quietly heading for the exits...," he said in his Gartman Letter.
Holdings of the largest silver ETF, the iShares Silver Trust, also rose on Tuesday, climbing 143 tons to a record high of 9,756 tons.
Silver prices responded by marking another 30-year high at $22.00 an ounce. It was last up 0.3 percent at $21.95.
Gains in silver have been outstripping those of gold.
The ratio of gold to silver dropped below 60 on Wednesday, the lowest in 11 months.
Palladium was the biggest climber of the precious metals on Wednesday, rising by as much as 2.5 percent to a 2-1/2 year high at $571 an ounce earlier in the day. It was last up 1.7 percent at $566.50.
Platinum reached its highest since May at $1,652.50, and was later up 1.2 percent at $1,650.50 an ounce.
(Additional reporting by Jan Harvey in London; Editing by Marguerita Choy)