NEW YORK Gold surged 3 percent to above $1,600 an ounce on Friday, ending June with its first monthly gain in five months, as a European deal to shore up banks and cut borrowing costs lifted bullion's investment appeal.
Silver and platinum group metals also soared after EU leaders agreed to let their rescue fund inject aid directly into stricken banks from next year and intervene on bond markets to support troubled member states.
Monetary stimulus by central banks and governments is bullish for gold, which has been a favorite among hedge fund managers and institutional investors to hedge against the loss of purchasing power due to currency depreciation and inflation.
The metal, which has for the most part of this year moved in tandem with riskier assets, received a boost from heavy short-covering after losses earlier this week sent the metal close to being oversold.
A 9 percent jump in U.S. crude futures also helped gold, with sharp gains in grains, other commodities, the euro and U.S. equities amid a better economic outlook after the EU deal.
"The gold rally is likely to continue because once again we held well above the $1,525 key support level, we've had rapid short-covering and now we have some physical demand. I don't think the market will press prices significantly at least in the near term," said James Steel, chief commodity analyst at HSBC.
Spot gold was up 3.2 percent at $1,599.66 an ounce by 3:15 p.m. EDT (1915 GMT), having hit a session high of $1,606.79 an ounce, the loftiest price since June 20.
U.S. gold futures for August delivery settled up $53.80 an ounce at $1,604.20, with trading volume in line with its 30-day average for the first time in about a week, preliminary Reuters data showed.
Spot silver rose 4.6 percent to $27.54 an ounce.
Still, gold posted a 4 percent drop for the three months to the end of June, its biggest quarterly fall since the third quarter of 2008.
After an 11-year bull run, which took gold prices to a record $1,920.30 an ounce last September, it is now up just 2 percent on the year.
GOLD COIN SALES WEAK IN Q2
Gold coin consumption, viewed by some as a market-fear gauge, tumbled in the second quarter to levels not seen since before the 2008 economic crisis, reflecting the metal's failure to attract safe-haven bids despite economic uncertainty.
Sales of the U.S. Mint's American Eagle gold coins fell more than 50 percent year-on-year to 127,500 ounces in the second quarter, their worst three months since the second quarter of 2008 -- prior to the height of the global economic crisis, the Mint's website showed.
Physical gold buying in major consumer India picked up a little on Friday. Weakness in Indian demand has undermined spot prices this year, with Indian gold prices near record highs due to rupee weakness.
Among platinum group metals, spot platinum was up 4.2 percent at $1,441.75 an ounce, while spot palladium rose 3.7 percent to $581.75 an ounce. Both have rebounded from their 2012 lows earlier this week.
(Additional reporting by Jan Harvey in London; Editing by Dale Hudson)