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New York - Gold jumped nearly 3 per cent to an all-time high at above $1,230 (U.S.) an ounce Tuesday, as traders sought safety after a $1-trillion European rescue failed to put to rest fears of euro zone debt contagion.

After trading modestly higher in choppy trade earlier in the day, spot bullion prices kicked above their previous $1,226.10 peak set on Dec. 3 after U.S. stock markets turned negative at mid-afternoon, resuming a safe-haven rally that had threatened to stall with Monday's brief revival of risk appetite.

Silver also rose 4.5 per cent to a five-month peak, posting its biggest one-day percentage gain in six months, while platinum and palladium were little changed.

Having broken down the previous high, analysts began looking for the next target.

"We think there is an upside risk for gold and it has the potential to go to $1,600 [an ounce] within a year or so," said Bart Melek, global commodity strategist at BMO Capital Markets.

"We think there are continued sovereign risk issues, even after the European debt bailout. Buying gold or precious metals generally as a hedge will continue until this environment stabilizes somewhat."

After touching a record $1,233.65 an ounce, spot gold rose $30.85 or 2.6 per cent to $1,232.75 an ounce at 3:30 p.m. ET, against $1,201.90 late on Monday.

U.S. gold futures for June delivery on the Comex division of the New York Mercantile Exchange was up more than $30 at above $1,230 an ounce. Earlier, June settled at $1,220.30 an ounce.

Gold looked primed for a run at the previous record after a rush of retail buying last week, and its very limited dip on Monday, when the S&P 500 index rallied 4 per cent as risk markets cheered the $1-trillion emergency aid package.

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"While this provided at least a temporary band aid for the sovereign debt crisis, there is still a potential for significant problems and the need to potentially do more," said Bill O'Neill, partner at New Jersey-based commodities firm Logic Advisors.

"I just don't think there is a high level of confidence. This package bides time but it doesn't indicate that the crisis is necessarily over, and that's what gold is reflecting."

Meanwhile, technical analysts have been citing a reverse head-and-shoulder pattern signalled the metal's next move should be a test upward to $1,240 an ounce.

Market watchers said the rescue package could be too little too late to solve a global sovereign debt crisis.



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"Investors are trying to search out safe havens, and clearly gold is one of those," said RBS Global Banking & Markets analyst Daniel Major. "While the current environment of acute investor risk aversion remains, gold is bound to benefit."

Some analysts also doubted the long-term viability of the euro and potential adverse economic implications given the massive size of the aid deal.

"Gold has now consistently shown that it does not have to follow the so-called traditional inverse relationship with the dollar. It is front and centre assuming its role as the currency of choice," Mr. O'Neill said.

Gold priced in euros and Swiss francs also hit record highs at €971.34 ($1,232.02) an ounce and 1,367.30 francs ($1,231.63) an ounce respectively.

Silver hit a five-month high at $19.42, and was last at $19.35 an ounce against $18.44.

Metals research firm CPM Group said in a trade report that investors bought 209.7 million ounces of silver last year, the second highest in history, and silver's strong appeal as both a precious and industrial metal will lift demand further in 2010.

Platinum group metals were largely flat after Monday's rebound. Platinum was at $1,695.50 an ounce against $1,693 and palladium at $528.50 against $529.