LONDON (Commodity Online) : Gold reached record highs above $1,280 while silver chalked up new 2-1/2 year gains on Friday on a soft dollar and concerns that more cash injections may be needed to sustain the global economic recovery.

Gold's gains came as the dollar retreated further against the euro, reaching new one-month lows of 1.3148.

A weaker dollar makes gold cheaper for holders of non US-denominated currency. The traditional relationship with the dollar is back on and amid quantitative easing fears. Everybody seems to be looking at $1,300 and it looks like we will get there.

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Seasonally, it's also the strongest period of demand for the year on a mix of weddings and smaller festivals in India, plus the build up for Christmas in the northern hemisphere.

Spot gold was at $1,281.05 an ounce on Friday, having reached a new record of $1,281.20 earlier, versus $1,272.20 an ounce last quoted in New York on Thursday.

Silver was at $20.95 an ounce versus $20.72 an ounce on Thursday, having hit its most expensive since March 2008 at $20.96 an ounce earlier.

Platinum was at $1,615 an ounce versus $1,603.65 an ounce while sister metal palladium inched higher to $553.50 ounce from $544.65 an ounce.

US December gold futures also rose to a historic high. The dollar eased against a basket of major currencies, bolstering the case for bullion, with currency markets struggling to settle after Japan's huge intervention to weaken the yen a day earlier.

As world stocks slipped, gold has become an insurance policy for investors. All the ingredients are still there - all the uncertainty and fear - to keep gold underpinned.

Analysts and traders are looking to $1,300 an ounce as a major psychological marker, with $1,350 seen as the next potential target.

Gold rising to $1,300/oz looks increasingly likely and it is only 2 percent below that level now. Once $1,300/oz is breached, gold could experience a pullback and consolidation.

Positive macro data is also partly behind the run higher in industrial precious metals such as silver, platinum and palladium.

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