| NEW YORK
NEW YORK Gold futures rose on Friday, hitting all-time highs above $1,300 an ounce as investors fretted over economic uncertainty after the Federal Reserve raised expectations to take new measures to spur growth.
Silver also surged to a 30-year high on strong investment buying, with holdings of the world's largest silver-backed exchange-traded fund rising to a record high.
Adam Klopfenstein, senior market strategist at MF Global unit Lind-Waldock, said renewed worries about inflation buoyed gold after U.S. durable goods data came in stronger than expected and grain prices rallied.
"Forward looking, on the inflation front, you are getting a lot of long-term investors coming into the gold market," Klopfenstein said.
U.S. gold futures for December delivery hit a record $1,301.60 an ounce, then retreated from session highs as Wall Street rallied, with the S&P 500 stock index up 2 percent.
The benchmark contract settled up $1.80 at $1,298.10 an ounce. Spot gold rose 0.3 percent to $1,297.30 an ounce at 3:28 p.m. EDT (1928 GMT). Bullion posted its biggest two-week gain since May.
Gold has risen more than 4 percent so far this month and hit record highs in six out of the last seven sessions.
New orders for a wide range of long-lasting U.S. manufactured goods rose in August and business spending plans rebounded strongly [ID:nN24184114], while grain prices rose across the board on a weaker dollar.
Expectations of further dollar weakness underpinned gold, as the greenback fell against a basket of currencies to its lowest level since February.
The Fed said on Tuesday it stood ready to pump billions of dollars into the economy if needed, through purchases of government debt, a process known as quantitative easing. The prospect prompted investors to buy bullion as a hedge against the possibility of a double-dip recession or inflation.
"The U.S. Fed is obviously contemplating, and the market is expecting, some kind of statement on quantitative easing," said Deutsche Bank analyst Daniel Brebner. "The influx of new money in the system raises longer term expectations for inflationary forces."
In addition, a number of major countries have been moving to curb their currencies to bolster growth. This has boosted gold's appeal as an alternative investment.
DEALERS SELL GOLD OPTIONS
Option dealers could keep selling gold options to bring in premiums from buyers, as price volatility petered out despite a rally of gold futures to all-time highs, COMEX floor traders said on Friday.
Since late July, gold's 30-day implied volatility, a common risk gauge, fell to 15.5, nearly 40 percent below this year's high at 25 in May.
Gold appeals to investors uncertain about inflation, deflation, the dollar and further Fed stimulus, said Evy Hambro, joint chief investment officer of BlackRock's Natural Resources team, which has more than $36 billion assets under management.
"I think gold is quite realistic where it is right now," he said.
Gold's rally to record highs generated strong investor interest in silver, which is also widely used as an industrial metal in the electronics and photography sectors.
Silver, tracking gains in gold, rose 1.5 percent to $21.45 an ounce. During the session, silver surged to its highest level since 1980 at $21.47 an ounce.
Holdings of the world's largest silver-backed exchange-traded fund, the iShares Silver Trust hit an all-time high of 9,582.59 tonnes on Thursday.
Platinum climbed 0.4 percent to $1,644.50 an ounce, while palladium rose 1.6 percent to $559.50 an ounce.
(Additional reporting by Jan Harvey in London; Editing by David Gregorio)