Gold rose to its highest since March on Thursday as European shares fell after weak economic data and the dollar remained flat following minutes of the Federal Reserve's June meeting, which gave no sign about the timing of any interest rate rise.
The market also gained support from India's decision to keep the import duty on gold unchanged at a record 10 percent in the budget on Thursday, against expectations for a reduction. The move drove India's most-traded August gold contract up as much as 3 percent.
Spot gold rose 1.5 percent to its highest in 3-1/2 months at $1,345.00 an ounce in earlier trade and was up 1.3 percent at $1,342.30 by 1219 GMT. The rise was aided by a technical break through strong chart resistance at $1,334, traders said.
U.S. gold futures for August delivery gained 1.4 percent to $1,342.10 an ounce, while silver rose as much as 2.4 percent to its highest since March 17 at $21.55 an ounce.
Gold extended earlier gains after European shares drifted lower on weak economic data from Italy and on mounting concern about the financial health of Portugal's largest listed bank.
"This morning we are seeing some flows into gold as equities started to crumble again ... investors are again diversifying their portfolios and increasing exposure to precious metals as a hedge against concerns about the euro zone's financial situation," Quantitative Commodity Research director Peter Fertig said.
The dollar was trading close to a one-week low against a basket of currencies. A weaker U.S. currency makes dollar-denominated commodities attractive for holders of other currencies.
Gold had come under pressure after last week's strong U.S. jobs report stoked speculation of an early hike in rates. Higher interest rates would encourage investors to switch to assets that, unlike gold, pay interest.
But at the minutes from the June 17-18 Federal Reserve meeting, analysts found little to suggest any move forward towards an interest rate increase, currently expected in the middle of next year. The Fed indicated it would end its asset purchases in October.
Markets were awaiting the weekly jobless claims report, scheduled at 1230 GMT.
INDIA DUTY UNCHANGED
Some in the Indian gold industry had expected the new government led by Narendra Modi to ease import restrictions introduced last year, but no change came from a fiscal budget meeting on Thursday.
In 2013, India took steps to curb gold purchases and imposed a 10 percent duty on imports in an effort to reduce its high current account deficit. Indian gold imports slid by a fifth last year.
A senior official at its biggest gold trading group had said earlier this week that he expected India to ease the gold import duty to 6 percent in Thursday's budget. Among other precious metals, platinum continued to gain amid fears over supply issues from major producer South Africa, up 1.1 percent at $1,512.50 an ounce, having earlier risen to its highest in 10 months at $1,518.25.
Palladium touched a fresh high since February 2001 at $875.60 in earlier trade before turning 0.1 percent lower at $867.13 an ounce and snapping a 13-session winning streak.