Tokyo - Gold rose above $1 120 per ounce to hit a record high on Thursday for the second straight day as investors focused on the precious metal's appeal as a hedge against a weakening dollar.
Improvements in the economic outlook also lent support to the precious metal. Gold is often seen as a hedge against energy price-led inflation.
Spot gold was at $1 119.65 an ounce as of 02:32 GMT after rising to a record $1 121.60, compared with New York's notional close of $1 117.45.
Bullion has now renewed record highs for six out of the past eight sessions.
US gold futures for December delivery traded at $1 120.30 an ounce, up 0.5%. The contract earlier rose to a fresh record of $1 122.20.
Dick Poon, manager of precious metals at Heraeus in Hong Kong, said there was some improvement in demand from the industrial sector. But a key driver for gold's extended gains was a broad-based fall in the dollar, he said.
"Fund managers are changing their portfolios and so are our customers, given that the euro and Asian currencies are getting stronger," Poon said, adding that gold will likely test its next target of $1 200 by the end of this year.
The Australian dollar hit a 15-month high against the US dollar on Thursday after a better than expected employment report led investors to believe a further increase in interest rates was almost certain next month.
The dollar index, a gauge of the greenback's performance against six major currencies, was around 75 after hitting a fresh 15-month low of 74.744 the previous day.
Risk tolerance was increasing among investors after strong factory output data from China pointed to a strengthening global economy, boosting commodities and stock prices and providing more support to the precious metal.
"The euro clawed back above $1.500 and oil steadied near $80 (a barrel). Japanese stocks are extending their gains. Everything looks good for gold," said Shuji Sugata, a manager at Mitsubishi Corp Futures' research team.
On Wednesday, Vietnam's central bank said it will allow imports of gold - banned since May last year - after the sharp rise in bullion prices in recent days, potentially opening up a new source of demand.
But a lack of foreign currency in Vietnam means even if there was demand for the precious metal it would not be enough to have an impact on the market as a whole, said Kaname Gokon, deputy general manager at Japanese commodity brokerage Okato Shoji.
Separately, gold has been underpinned by hopes for more central bank buying after news last week that the International Monetary Fund had sold 200 tonnes of bullion to India's central bank.
On the supply side, Barrick Gold Corp, the world's biggest gold producer, told Reuters it sees the potential for record margins in the fourth quarter as gold prices hit new peaks and costs are stable or lower.
But interest in gold exchange-traded funds remained soft, with holdings of the largest bullion-backed ETF, New York's SPDR Gold Trust, at 1 114.443 tonnes on Wednesday, unchanged since November 9.
- Reuters