The price of gold surged to a record peak of $1,095.80 an ounce in trading today in the wake of the International Monetary Fund's massive sale of the precious metal to India.
Gold had already reached a record high of $1,087.80 yesterday as the IMF said it had sold 200 tonnes of gold to India's central bank over a two-week period last month for $6.7 billion to bolster its finances.
After spiking to a new high earlier today, gold later pulled back to $1,090 in London this evening.
Analysts said that the deal with India is an indication that, despite the prevailing high price level, central banks from emerging economies are still willing to accumulate gold to diversify their currency reserves.
Gold and other commodity prices have surged in recent months amid a move away from the dollar, which has been slumping. The move accelerated last month on a report that Gulf states may stop using the dollar for oil trading.
The metal is also winning support from fears over a possible spike in inflation, as gold is widely regarded by investors as a safe store of value.
The sale to India was nearly half the 403.3 tonnes of gold that the IMF has targeted for sale over the coming years. Washington-based IMF, which currently holds 3,217 tonnes of gold, is the third-largest official holder of the precious metal after the US and Germany.
India is the world's biggest consumer of gold, importing between 700 and 800 tonnes of the metal every year or 20% of global demand.
A senior IMF official said that the IMF was 'lucky' in selling the 200 tonnes to India for roughly $1,045 an ounce, compared with $850 an ounce in April 2008. Gold's price, which has risen more than 20% this year, has a bright future thanks to improving demand caused by the financial crisis, industry experts said this week.
Plush London department store Harrods last month surprised the retail industry by starting to sell gold bars, with prices fluctuating according to the current market price.
