SINGAPORE, Nov 5 — Gold surged to a new record yesterday, crossing the US$1,090 (RM3,706) level for the first time, a day after the International Monetary Fund announced a massive sale of the metal to India.

The precious metal touched US$1091.1 an ounce by late afternoon — up 2.8 per cent from US$1061.50 a day ago.

Analysts said a weaker dollar could push prices to US$1,100 an ounce.

Indeed, traders say gold is reacting to the sentiment that more central banks, like China, may possibly choose to move out the dollar and into safe-haven gold as US debt grows and the dollar weakens further.

And on Tuesday, IMF had disclosed its 200-tonne sale of gold to India at an average price of US$1,045 an ounce. More importantly, the move underscored gold’s increasing status as an official reserve and fuelled speculation that other governments may be ready to diversify their reserves.

“Not only has India’s move made it more likely that all of the IMF’s 403 tonnes sales programme will go directly to central banks rather than via the open market, but it is an indicator that central banks as a group may soon shift from net seller to net buyer for the first time in three decades,” said Nick Moore of RBS commodities team.

In euro terms, the price of gold leapt to 739 an ounce, up more than 3 per cent yesterday, suggesting that the price spike wasn’t because of the US dollar but driven by fundamental demand.

The recent surge was also reflected in investment flows. For example, the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings rose to 1,108.399 tonnes as of Nov 3, up 4.88 tonnes or 0.4 per cent from the previous business day.

The metal is also winning support from inflation fears, as gold is widely regarded by investors as a safe store of value.

India is the world’s biggest consumer of gold, importing between 700 and 800 tonnes of the metal every year or 20 per cent of global demand.

At present, the United States and Germany occupy the top two positions, holding 8,133.5 tonnes and 3,408.3 tonnes of gold respectively in their reserves. Italy and France hold 66.6 per cent and 70.6 per cent of their reserves respectively in the precious yellow metal.

Gold and other commodity prices have surged in recent months amid a move away from the US dollar, which has been slumping.

The move gathered momentum last month on a report that Gulf states may stop using the US currency for oil trading. — Business Times Singapore