London: Gold hit a record high above $1,100 (Rs51,260) an ounce in Europe on Monday as the dollar index slid 1% on expectations US interest rates will remain low, boosting interest in the metal as an alternative asset.
Spot gold reached a peak of $1,109.15 an ounce, and was bid at $1,107.40 an ounce at 11.51 GMT, against $1,096.30 late in New York on Friday.
The precious metal extended last week’s near 5% gains, when fund buying took it to record highs after India’s central bank bought 200 tonnes of gold from the International Monetary Fund and with the dollar weakening further. “Gold is unstoppable,” said Michael Kempinski, a senior trader with Commerzbank. “The forex market helps, and, technically, it seems pretty good. And as we know, funds like to take more in on the highs to push (prices) further.”
US gold futures for December delivery on the Comex division of the New York Mercantile Exchange rose $12.30 to $1,108.00 an ounce.
The dollar weakened broadly on Monday after a Group of Twenty meeting and US jobs data did little to alter the view that US interest rates will stay low for the foreseeable future, offering little incentive to buy the currency.
Weakness in the US unit tends to benefit all dollar-priced assets, as it makes them cheaper for other currency holders.
Other commodities also rose, with industrial metals climbing across the board and oil prices rising at least $1 a barrel. Strength in crude prices often helps support gold, which can be used as a hedge against oil-led inflation.
Demand for physical gold was soft, however, with high prices curbing appetite for bullion in India, though a strong rupee lent support.
Dealers noted sales from Indonesia, but the limited amount of scrap being returned to the physical market despite record prices suggested that holders expected more gains.
European traders noted that gold’s strength in currencies other than the dollar suggested gains could be resilient.
On Monday, gold priced in euros held near its highest since March at €740.69 (Rs51,552), while sterling-denominated gold hit £661.88 (Rs51,560), within reach of eight-month highs.
“Gold (in euro terms) is €50 per ounce higher compared to a month ago, so US dollar weakness is not the only driver,” said Michael Blumenroth, a trader at Deutsche Bank.
The world’s largest bullion-backed exchange-traded fund, New York’s SPDR Gold Trust, said its holdings were unchanged on Friday from the previous session.
ETF Securities said holdings of its ETFS Physical Gold fund rose at least 2% to 3.324 million ounces on Friday.
Among other precious metals, silver was bid at $17.66 an ounce versus $17.38, platinum at $1,356.50 an ounce versus $1,342.50, and palladium at $330 against $327.50.