Weak dollar helps gold hit record highs

GOLD hit record highs near $1120 an ounce yesterday as the dollar index fell to 15-month lows, with expectations that a US economic recovery will be erratic seen keeping American interest rates low.

GOLD hit record highs near $1120 an ounce yesterday as the dollar index fell to 15-month lows, with expectations that a US economic recovery will be erratic seen keeping American interest rates low.

The metal is now poised for more gains, analysts said, with the weak dollar helping gold build on a rally that began last week after the IMF sold 200 tonnes of bullion to India's central bank, raising the prospect of more official sector buying.

Spot gold hit a high of $1117,95 an ounce and was at $1114,85 yesterday against $1105,30 late on Tuesday.

The dollar index fell a quarter of a percent to a 15-month low of 74831 and the euro rose to a two-week peak within sight of last month's 2009 high of just over $15060.

Analysts said the dollar was smarting after a chorus of Fed officials said on Tuesday that high unemployment and sluggish consumer spending were risks to recovery in the US economy, which may keep the Fed funds rate low.

Weakness in the unit boosts gold's appeal as an alternative asset, and makes dollar-priced commodities cheaper for holders of other currencies.

Gold prices also rose in non-dollar terms. Euro-denominated gold reached its highest since March at ß743,27.

"The way gold keeps accelerating away from its previous highs is quite incredible," said Saxo Bank senior manager Ole Hansen. "Continued momentum is driving prices higher. Whenever we see new highs, we see more momentum buying."

In supply news, Barrick Gold Corp, the world's biggest gold producer, said it sees the potential for record margins in the fourth quarter as gold prices hit new peaks and costs are stable or lower. - Reuters

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