Spot market gold prices hit $1,584 an ounce ahead of Friday's US trading – a 2.3% rise from the previous day's low – while stocks, commodities and the euro also rallied following news of an "important" agreement at the European Union summit in Brussels.
Silver prices climbed to $27.38 by lunchtime in London – a 4.6% gain on yesterday's low.
"Resistance [for gold prices] is at the top of the past week's range in the $1,587-88 area," says technical analysts at bullion bank Scotia Mocatta, who add that further resistance is seen at $1,625.
News of an agreement among European leaders on the use of bailout funds "has been positive for the euro and positive for confidence in general," adds Scotia's head of precious metals Simon Weeks.
"[This] means that equities and commodities, including gold for the time being, have all received a shot in the arm."
European leaders meeting in Brussels have asked the European Council to consider proposals for the creation of a single Eurozone banking supervisor "as a matter of urgency by the end of 2012", an summit statement issued early on Friday said.
The creation of a supervisory body could then be followed by allowing money from bailout funds to directly recapitalize banks, rather than being loaned to governments for that purpose, the statement continued.
"We affirm that it is imperative to break the vicious circle between banks and sovereigns," said the statement from the EU summit, which continued Friday.
European leaders also confirmed that assistance given by the European Financial Stability Facility to Spain's government – up to €100 billion to fund banking sector restructuring – will transfer to the permanent bailout fund the European Stability mechanism when it becomes operational next month.
The loans will transfer to the ESM "without gaining seniority status" over other Spanish government bonds.
The statement also included a commitment to use "existing EFSF/ESM instruments in a flexible and efficient manner in order to stabilize markets".
"We have taken important decisions last night," said German chancellor Angela Merkel, who prior to the summit expressed opposition to using bailout fund to buy bonds.
"We agreed that if countries need the instruments to buy bonds on the primary or secondary market from the EFSF or ESM then...conditionality would apply."
A country report would need to be presented and a memorandum of understanding drawn up, Merkel added.
"That would be the case if Spain or Italy, with regards to their interest burden, make use of such instruments."