Gold surged 1.5% on Thursday as investors sought shelter in the precious metal on fears of further turmoil after news that a Malaysian passenger jetliner had been downed in Ukraine.
Earlier, safe-haven bids had already boosted bullion prices on new US and European Union sanctions on Russia, fresh on the heels of news that a Ukrainian fighter plane had been shot down over eastern Ukraine.
Gold rallied $20 per ounce in about 40 minutes and the S&P 500 equities index tumbled after the Malaysian airliner was brought down over eastern Ukraine, killing all 295 people aboard and sharply raising the stakes in a conflict between Kiev and pro-Moscow rebels in which Russia and the West back opposing sides.
Also lifting gold prices was news Israeli Prime Minister Benjamin Netanyahu on Thursday instructed the military to begin a ground offensive in Gaza.
Gold investors scrambled to establish new long positions and bought back bearish bets on the news, traders said.
"When the news came out, it was frantic buying and short-covering in the market, a combination of buy-stops being triggered and traders repositioning as fast as possible," said Phillip Streible, senior commodities broker at RJ O'Brien in Chicago.
"People are a little cautious now as they are not going to have as much exposure to riskier assets like the S&P 500, and that should help gold," Streible said.
Spot gold was up 1.5% at $1,317.80 an ounce at 4:10 p.m. EDT (2010 GMT), breaking above key technical resistance at its 100-day moving average near $1,297.
US gold futures for August delivery settled up $17.10 an ounce at $1,316.90.
Turnover was much heavier than usual with volume about 25 percent above its 30-day average, preliminary Reuters data showed.
Before the Malaysian jetliner news, precious metal prices were higher on US President Barack Obama's move to impose sanctions on some of Russia's biggest companies for the first time over Moscow's failure to curb violence in Ukraine.
The sanctions, the toughest yet imposed by the United States, also helped send palladium to 13-1/2 year highs. The metal is chiefly sourced from Russia.
Palladium benefits as the new US sanctions fueled further buying from investors already expecting supply to struggle to keep pace with demand this year.
Spot palladium peaked at $887.90 an ounce and was last up 1.2% at $881.25. It is the best performing of the main precious metals this year, up about 24% so far.
Spot platinum was up 1.4% at $1,497.90 an ounce, while spot silver rose 2.1% to $21.11 an ounce.