Platinum breached the psychological level of $1,000 an ounce, hitting its highest since 1980, as it tracked gold's gains.
Spot gold was quoted at $501.50/502.00 an ounce in afternoon trade, up from $498.20/499.00 an ounce last quoted in New York on Monday. Gold was trading at its highest since December 14, 1987, when it hit $502.97 an ounce.
"People are looking for an alternative investment to US dollar-based instruments (such as bonds). The expectations of inflation in the coming year are very high," said Albert Cheng, Far East managing director for the industry-backed World Gold Council.
But jewellery manufacturers and buyers may need time to adjust to the high prices as bullion has gone up more than 13 percent in value since the start of the year, Cheng said.
"Once they are comfortable with this level, it will not deter people from buying jewellery. People tend to buy more when the price of gold is actually upward," he said.
The council said this month that global demand for gold in the third quarter totalled 838 tonnes, a rise of 7 percent from the same quarter a year, as surging investment demand helped offset a slowdown from the jewellery sector.
Dealers expected volatile trade for gold, as profit taking was likely to emerge. Dealers noted sales of gold bars, jewellery and scraps across Asia as the metal approached $500
Gold held above $500 for just one day in December 1987 while it managed to peak at $509 in February 1983, before falling to around $340 by the end of that year.
It hit a record high of $850 an ounce in January 1980. "Now that we've seen that magical number, we might see some selling. Also, the long speculative interest has increased in New York, so there's always that liquidation fear," said a dealer in Singapore.
"I don't expect gold to drop much below $500 in Asia. There will be bidding interest that will keep it certainly above $498. If any selling comes up, I think it will come in New York time," said the dealer.
The latest weekly Commitments of Traders report issued by the Commodity Futures Trading Commission on Monday showed the speculative net long position in New York's Comex gold surged to 162,982 contracts in the November 22 week from 129,686 contracts as of November 15.
Sales of gold bars and scraps went on in Singapore, a centre for bullion trading in Southeast Asia, as investors in Indonesia and Thailand cashed in their holdings.
"We still see some sales but it's less now, maybe because the market is drying up. Gold bars are mostly on a par with the London price, but we also note a 20 US cents premium," said one dealer.
In other precious metals, platinum stood at $999/1,003 an ounce, up from $989/993 in New York as investors shrugged off profit-taking in Tokyo futures after the benchmark October contract matched on Monday's record high of 3,855 yen per gram.
Silver inched down to $8.32/8.35 an ounce from $8.35/8.37 late in New York.Palladium fell to $260/264 from $261/264 late in New York.