The price of gold hit a record high above $1,100 an ounce in London today following a report that Sri Lanka had joined India in purchasing the precious metal in favour of the US dollar.

'The Central Bank of Sri Lanka has announced that it is buying gold to diversify its reserves,' the World Gold Council said in a statement issued before gold struck a record high of $1,101.42.

It later retreated to $1,092.65 an ounce in late trading.

The commodity had reached a record high of $1,087.80 on Tuesday 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.

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 greenback 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.