Weakness in the US dollar and a year-end flurry of investment in commodities pushed gold to its highest in three weeks on Thursday, while palladium hit fresh nine-year highs after having almost doubled in price this year.

Silver shot to new 30-year peaks as it benefited from strength in other industrial commodities, putting it on course for an 83 per cent gain this year, its strongest performance in nearly 30 years.

The dollar weakened broadly after the largest one-day decline in five-year Treasury yields in three months removed some of the currency's appeal to non-US investors.

Gold is set for its tenth consecutive annual gain, having risen by nearly 30 per cent in 2010, its strongest yearly performance since a 31 per cent gain in 2007 when the global financial crisis began to unfold.

Spot gold was last at $1,412.45 an ounce by 1014 GMT, having risen for three consecutive trading sessions to its highest level since Dec. 7. Gold's inverse correlation to the dollar index reached its strongest in eight weeks on a 30-day rolling basis.

'Overall, I don't think today or tomorrow we are going to have any kind of correction as such,' said Afshin Nabavi, MKS Finance head of trading.

'I'm quite friendly towards it and probably feel that tomorrow night we are going to end the year with some fireworks as well.”

Boost to gold

The euro zone debt crisis, which unfolded in April this year and culminated in multi-billion euro international bailouts of both the Greek and Irish governments, has been one of the prime drivers of investment demand for gold.

Holdings of gold in the SPDR Gold Trust, the world's largest exchange-traded fund backed by physical bullion, have risen by 15 per cent this year to 1,284.062 tonnes, and a near 20 per cent rise in open interest in US gold futures also reflects some of this investor desire to hold gold.

Gold prices were well supported after breaking above the key $1,400 threshold earlier this week, helped by strong physical demand in Asia.

Palladium notched up a fourth straight day of increases and was set for a second year of gains, having almost doubled to near $800 an ounce over the course of 2010 and is this year's top performing commodity.

Analysts widely expect a surge in demand for palladium next year, mainly from China, which boasts the world's largest auto market that is dominated by gasoline-powered vehicles, which use palladium in their catalytic converters.

The ratio of platinum to palladium has fallen to its lowest in about eight years this year, mirroring palladium's outperformance over platinum, which relies heavily on the flagging European car market as a source of industrial demand.

Spot palladium rose to a nine-year high of $795.00 before trading back at $793.97, up 0.4 per cent on the day, while platinum rose to a session high of $1,767.5, its highest since Nov 11, before holding steady at $1,756.74.

Silver hit a 30-year high of $30.88 an ounce, before easing to $30.76, up 1 per cent on the day.

In the penultimate trading day of the year, investors will keep their eye on the weekly initial jobless claims data from the US to gauge the health of the world's largest economy.

'If the initial claims data comes positive, it could prompt some profit-taking in gold,' said Ong Yi Ling, an analyst at Phillip Futures. – Reuters