Sept. 4 (Bloomberg) -- Gold traded near $1,000 and was set for its strongest weekly rally since April after the price broke through a technically important level, luring investors.

Gold was at $989.68 an ounce, close to a six-month high, after climbing 3.6 percent this week. A move through $976 means gold may have resumed a “bull-run,” targeting $1,033 and then potentially a high of $1,106, according to Barclays Capital.

“We have seen a lot of short covering and new buying,” Jonathan Barratt, managing director at Commodity Broking Services Pty, said in a phone interview today. “The move is technically driven. We’ve not seen any real fundamentals that would suggest that this rally can be sustainable.”

Silver traded near a 13-month high and was poised for its biggest weekly gain since May. Silver has advanced 41 percent this year compared with gold’s 12 percent.

Governments lowered interest rates and spent trillions of dollars to combat the worst recession since World War II, spurring investors to buy bullion as a hedge against potential inflation and debasement of currencies.

Demand for precious metals may be reviving on concern U.S. jobless data scheduled later in the day will curb optimism that a recovery in global economies is accelerating, said Charles Lee, a trader with Eugene Investment & Futures Co.

“There’s a flight-to-quality demand for precious metals,” Seoul-based Lee said by phone today. “People are cautious against being too optimistic about the economic recovery ahead of the release of U.S. employment data.”

Bullish Survey

Gold last traded above $1,000 an ounce on Feb. 20. The metal for immediate delivery reached a high of $997.80 yesterday and fell 0.2 percent today compared with its $991.85 close. Silver was at $16.055 an ounce, climbing 9 percent this week.

Bullion has strengthened even as the U.S. Dollar Index, a six-currency gauge of the greenback’s value, advanced for a second week. Oil rose 0.3 percent to $68.19 a barrel today, still set for the biggest weekly decline in eight weeks.

Twenty-one of 26 traders, investors and analysts surveyed by Bloomberg News, or 81 percent, said bullion would rise next week. Four forecast lower prices, and one was neutral.

Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, increased 14.65 metric tons to 1,078.01 tons as of Sept. 3, according to figures on the company’s Web site.

That compares with “the massive inflows of between 20 and 30 tons per day in spring,” when flight-to-quality purchases drove gold up to $1,000, Eugen Weinberg, a senior analyst with Commerzbank AG, wrote in a note yesterday.

“There is the risk of a sharp correction should speculative investors decide to take profits,” Weinberg said. The “proximity of the gold price to the $1,000 mark means that speculative demand is likely to stay high in the short term.”

Platinum for cash delivery gained 0.7 percent to $1,260 an ounce and palladium added 0.3 percent to $291.55 an ounce.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.net

Last Updated: September 4, 2009 02:34 EDT