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LONDON - The price of gold leapt above 1,150 US dollars per ounce here on Wednesday for the first time, buoyed by the weak US currency and recent central bank purchases of the precious metal, analysts said.
In afternoon trade on the London Bullion Market, gold jumped to a record high of 1,152.85 US dollars per ounce after forging a series of all-time peaks in recent weeks.
In the foreign exchange market, the euro climbed as high as 1.4977 US dollars in late afternoon trade in the wake of disappointing data on housing starts and inflation in the United States.
Traders said the dollar's overall weak tone was due to the prospect of US interest rates remaining close to zero for some time yet.
"The price of gold moved further north as the dollar's decline continued," said analyst Marius Paun at ODL Markets.
"Whilst the US Federal Reserve continues to reiterate that interest rates will remain low, investors appear willing to buy in the precious metal."
A weak greenback makes dollar-priced assets such as gold cheaper for buyers using stronger currencies, and tends to stimulate demand for them.
"Gold is getting support from a number of sources currently," added David Morrison at spread-betting firm GFT.
"Like all risk assets, it is benefiting from the sliding dollar, but it is also a safe haven for investors who are concerned about the safety of other currencies," he told AFP.
Morrison added that central banks were also building their reserves of the precious metal.
"We are also seeing (gold prices) rise as central banks become net buyers, after being net sellers for more than 20 years.
"China and Russia have added to their holdings, and could easily increase them again.
"Meanwhile, India and Mauritius have just bought gold from the International Monetary Fund."
The IMF had announced Monday it had sold two tonnes of gold to the central bank of the Indian Ocean island of Mauritius for nearly 72 million US dollars.
Earlier this month, it had sold 200 tonnes of gold to the central bank of India for 6.7 billion dollars.
In addition, Sri Lanka's central bank said it has been buying gold to diversify its reserves amid volatile currency markets.
The metal has also won support this year from fears over a possible spike in inflation, as gold is widely regarded by investors as a safe investment, traders said.
"Ultimately (gold) is a store of value which cannot be undermined by governments and central bankers," Morrison added.
"Consequently, investors flock to it when they are nervous and in times of uncertainty."
- AFP/ir
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