Gold hit record highs near $1,200 an ounce today as dollar weakness fuelled buying of the metal as an alternative asset, while investors speculating on more gains were cheered by recovery from last week's setback.
Spot gold hit a peak of $1,198.70 an ounce and was bid at $1,190.20 an ounce at 1315 GMT, against $1,179.10 late in New York yesterday.
"The fact that we are seeing the dollar weaken is helping to drive gold," said Ole Hansen, senior manager at Saxo Bank.
He said investors had been encouraged by the strength of gold's recovery after it fell to below $1,140 an ounce last week, with the fall being met with strong fund buying.
"Everyone was waiting for that correction, and the way gold recovered suggested there was a lot of buying lurking in the wings (among) people who missed the opportunity to get into the market in the first place," said Mr Hansen.
US gold futures for February delivery on the COMEX division of the New York Mercantile Exchange also hit a record $1,200.50 an ounce and were later up $9.40 at $1,191.70.
The dollar index, which tracks the U.S. currency's performance against a basket of six others, fell today as more clarity about Dubai's debt situation eased some concerns over the region's stability, lifting risk appetite.
The dollar also pared gains against the yen after comments from the Bank of Japan on monetary policy.
Weakness in the US unit boosts gold's appeal as an alternative asset and makes dollar-priced commodities cheaper for holders of other currencies.
Other commodity prices also firmed on the back of the weaker dollar, with base metals firming and oil rising more than half a percent to nearly $78 a barrel.
Gold tends to track crude prices, as the metal can be bought as a hedge against oil-led inflation.
Reuters