Gold price hits record high as dollar wanes

LONDON (AFP) – Gold prices hit a record high of 1,111.20 dollars an ounce on Monday in response to rising demand for the precious metal from emerging economies and a decline in the value of the dollar.

The gold price on the London Bullion Market later closed at 1,106.75 dollars -- up from 1,096.75 dollars an ounce late on Friday.

In late afternoon trading, the euro rose to 1.5007 dollars compared to 1.4846 in New York late on Friday. The euro also rose against the Japanese unit, going up to 134.76 yen compared to 133.45 yen previously.

The dollar meanwhile fell to 89.81 yen from 89.90 yen late on Friday.

Gold "established itself above the psychological (1,100-dollar) level this morning as ministers at the weekend G20 meeting pledged to maintain their fiscal stimulus measures," said James Moore, an analyst at TheBullionDesk.com.

Last week, the US Federal Reserve decided to hold rock-bottom US interest rates for "an extended period" and to keep trillion-dollar stimulus measures in place to support a fragile US recovery from recession.

"Unless there's a turn in US interest rates, gold will be well bid," said Ronald Leung, director at Lee Cheong Gold Dealers in Hong Kong.

The governments of the world's leading industrial and emerging economies said in a statement over the weekend that "recovery is uneven and remains dependent on policy support" -- a signal that stimulus plans will be kept in place.

The International Monetary Fund also argued that stimulus measures must remain to avoid endangering a "nascent" economic recovery.

Valentin Marinov, an analyst at Germany's Commerzbank, commented: "Investors seem to like risky assets yet again following the G20 meeting."

The euro is considered a riskier, and therefore more high-yielding, investment on currency markets compared to the "safe-haven" dollar, which is a more popular bet in times of greater economic turbulence.

Gold had on Friday reached above 1,100 dollars an ounce for the first time, following news that Sri Lanka had joined India in purchasing gold instead of the US currency and amid growing interest from China.

"We have been observing that prices of gold have been going up so we have been strategically buying gold over the past several months as part of a reserve management process of diversifying our portfolio," Sri Lanka Central Bank assistant governor Nandalal Weerasinghe told AFP on Saturday.

The IMF last week said it had carried out a massive sale of 200 tons of the precious metal to India's central bank over a two-week period last month for 6.7 billion dollars in order to bolster its finances.

In London on Monday, the euro was changing hands at 1.5007 dollars against 1.4846 dollars late on Friday, at 134.76 yen (133.45), 0.8964 pounds (0.8934) and 1.5102 Swiss francs (1.5100).

The dollar stood at 89.81 yen (89.90) and 1.0065 Swiss francs (1.0171).

The pound was at 1.6782 dollars (1.6611).