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London: Gold jumped more than two per cent on Thursday as investor buying picked up while oil surged and the dollar weakened against the euro, boosting the metal's appeal as an alternative investment and as an inflation hedge.
Gold's gains pushed up other precious metals, with platinum rising more than two per cent. Silver and palladium also advanced.
Spot gold hit a high of $887.50 an ounce, up from $865.05/$866.25 an ounce in late New York on Wed-nesday when it touched a one-week low of $859.30 on a firmer US dollar.
"The market seems to have ended it consolidation phase after sustaining above the $860 level," said Pradeep Unni, analyst at Vision Commodities Services in Dubai.
"Although further gains would be needed to erase the bearish tone, selling seems to have momentarily ended. As long as $860 holds, the bulls are safe."
But gold was still more than $100 away from a record high of $1,030.80 an ounce hit on March 17, and dealers expected jewellery makers to take advantage of lower prices to stock up again.
Opportunity
"This is a perfect opportunity for them to be restocking because the gold price could very easily get back above the $900 territory, and gold can do that in a very short space of time," said Nick Moore, metals analyst at ABN Amro.
"I think the high gold price clearly had very significant impact on jewellery off-take. I think the direction, looking ahead, will be driven partly by what's happening with oil."
US crude was up $1.55 a barrel at $125.77 by 1410 GMT yesterday, boosted partly by weakness in the dollar against the euro
The euro firmed to $1.5504 after strong euro zone growth in the first quarter. The dollar was also undermined by data showing a rise in US weekly jobless claims and a net outflow of capital in March.
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