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Investors piled into bullion while selling U.S. government debt on the premise the Fed might be comfortable with higher inflation if it meant faster economic growth.
Spot gold was enjoying the view at $1,314.56 an ounce having climbed 3.3 percent overnight in the sharpest gain since last September.
Traders also said a major hedge fund had cut back a large short position in the precious metal which pushed prices above $1,300 an ounce and tripped a host of stop-loss buy orders.
Equities were in ebullient mood with MSCI's all-country world index, which includes about 85 percent of global investable equities, passing its previous all-time high set in November 2007.
Japan's Nikkei consolidated at five-month peaks, while the broader TOPIX brought its gains to more than 10 percent in just the past four weeks.
MSCI's broadest index of Asia-Pacific shares outside Japan was a fraction lower after rising 0.7 percent on Thursday. In Europe, the FTSEurofirst 300 index of regional shares had risen 0.6 percent to a six-year top.
Wall Street was more circumspect, though data on jobless claims and regional U.S. manufacturing continued to show improvement. The Dow edged up 0.09 percent, while the S&P 500 gained 0.13 percent and the Nasdaq lost 0.08 percent.
The revival in risk appetite follows Wednesday's decision by the U.S. Federal Reserve to recommit to keeping rates near zero for some time to come.
Crucially, Chair Janet Yellen sounded unconcerned by inflation despite a recent a pick-up in price pressure, surprising many who had thought the central bank would take a more hawkish turn.
TAKING INFLATION PROTECTION
"The dismissal of the recent upshift in inflation readings as 'noise' was the biggest revelation," said William O'Donnell, head of U.S. government bond strategy at RBS.
"The Fed leadership is so unsure about the sustainability of the recovery that they are willing to wait for economic growth numbers and labour market indicators to beat them over the head before they consider removing emergency stimulus."
As a result the market has pushed out the day when the Fed might hike its funds rate, while also taking insurance against higher future inflation by buying gold and selling longer-dated Treasuries.
Futures contracts that aim to map the course of the Fed funds rate again suggest no lift in rates until at least mid-2015. The June contract for next year now implies a rate of 31.5 basis points compared to 37.5 on Wednesday. Currently the funds rate is around 9 basis points.
Investors are also demanding higher returns on long-term U.S. debt compensate for the risk of higher inflation, so steepening the yield cure.
Yields on 30-year bonds swung up to 3.46 percent, from a low of 3.35 percent early in the week, while rates on 10-year paper reached 2.62 percent.
In currency markets, the Norwegian crown stole the limelight by plunging over 2 percent after the country's central bank hinted at the possibility of a cut in interest rates, stunning markets that had wagered the next move would be up.
The dollar surged to 6.1178 crowns in its biggest one-day gain in more than a year, while yields on short-term Norwegian debt tumbled 20 basis points.
Moves elsewhere were pedestrian in comparison, with the dollar steady on the yen at 101.90 while the euro edged up on the dollar to $1.3607.
The dollar also lost ground against a basket of major currencies as the market pushed out the
Brent was off 27 cents at $114.79 a barrel but that came after hitting a nine-month high above $115 on concerns heavy fighting in Iraq could limit oil supply from OPEC's second-biggest producer.
The U.S. crude oil futures contract for July added 21 cents to $106.64 a barrel.
