Gold investors went on a buying spree Friday, sending prices roaring up 8 percent after new evidence of the U.S. economy's sizzle and producer optimism suggested strengthening demand for the metal as an inflation hedge.
It was gold's biggest one-day rise in more than four months. Silver followed its lead on the Comex division of the New York Mercantile Exchange, jumping 5 percent.
In other commodity markets, cocoa sank to a 27-year low and soybean and grain prices reversed an early slide to finish with solid gains.
Gold prices rallied strongly after the government said U.S. unemployment had sunk to a 30-year low of 4 percent last month, heightening concerns that inflation could rise. Also, the decline in bond prices helped support gold's rise.
Then the market went sky-high when the world's No. 5 gold producer, Placer Dome, announced it would suspend its hedging activities and cut back gold hedges this year by 2 million ounces. The Canadian producer said other producers were certain to follow.
The moves essentially signaled that big producers were bullish on gold, and they sent speculators into a frenzy, pushing prices back to last fall's levels.
Gold for April delivery rose $22.60, settling at $312.50 an ounce, after reaching its highest level in three months at $318.50.
It hasn't taken a bigger leap since last Sept. 28, when it snapped out of the doldrums after sinking to a 20-year low of $255 last summer. That fever, which began when European banks moved to limit their gold sales, touched off a frantic two weeks in which gold spiked 34 percent to a high of $339 on Oct. 5.
Analysts said the market may be eyeing that lofty high again after Friday's stunning gain, particularly with rumors flying about hedge funds in trouble.
"If the emotions that we are playing on right now continue . . . we can obviously see a significant rise further in the price of gold," said Dave Meger, senior metals analyst for Alaron Trading Corp. in Chicago.
Dan Vaught of A.G. Edwards & Sons agreed. "The first suspicions is that you will get some follow-through here," he said.