Spot gold rose as high as $739,65 an ounce, its highest level since January 1980 when the metal rose to $850, and was quoted at $737,90/738,70 by 09:33 GMT. It closed at $733,80/734,60 in New York late on Thursday.

"The euro/dollar is still higher and eyes are also on oil prices. We have a good chance to see gold even higher as speculators and investors are still interested to buy some gold here," said Michael Kempinski, senior trader at Commerzbank.

"Gold's outlook is very positive and technically also it looks good, but the market is very volatile. I would buy the dip here. The short-term target is $750," he said.

The dollar stayed near record lows against the euro and a basket of currencies as investors awaited reports on US business activity and inflation for confirmation that more rate cuts are likely.

Friday data feature US personal consumption expenditure (PCE) numbers -- the Fed's favourite inflation measure -- at 12:30 GMT, followed by Chicago PMI -- which charts Midwest area business activity -- at 13:45 GMT.

A weaker dollar makes gold cheaper for other currency holders and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.