Gold hits record high, silver at new 31 year peak

Spot gold rose by 0.6 percent on the day to a record $1,458.80 an ounce by 0910 GMT. Silver rose to $39.48 an ounce, its highest since January 1980, when the spot price was above $45 an ounce.

Violence spreading across the Middle East and North Africa has been a key driver of gold's near 2 percent rally this month, while ratings downgrades of some smaller euro zone economies have bought European debt concerns back into the spotlight.

Gold prices extended gains after breaking above $1,450 an ounce on Tuesday when weak manufacturing data diminished expectations for an imminent tightening in U.S. monetary policy.

The metal's recent strength has been closely linked to accommodative policies, which have cut the opportunity cost of holding non-yielding assets. A run of healthier U.S. data has recently lifted expectations for tightening.

This would probably weigh on gold, while any extension of current quantitative easing, which would undermine the value of the dollar, would probably support prices.

"It is unquestionable that the demand for these precious metals derives from the devaluation of the leading currencies — the dollar, the pound and the euro," said Angelos Damaskos, a fund manager at Sector Investment Managers.

"Investors are looking for an alternative store of value, and one of those is the precious metals. Interest in gold as an investment has grown steadily over the last six or seven years."

Silver meanwhile is being lifted both by strength in precious metals investment and by the perception that improving economic growth will support demand from industrial end-users of silver, like electronics manufacturers.