London : Gold yesterday rose to a third successive record high, putting it on track for its strongest weekly performance in six months, as expectations for the US Federal Reserve to prop up the economy undermined the dollar.
The Fed is widely expected to resume quantitative easing — in which the central bank would buy government bonds for example and pump extra cash into the financial system to keep interest rates low — which has pushed the dollar down 7 per cent against a basket of currencies in the last month.
Gold, which usually benefits from dollar weakness due to its inverse relation with the US currency, has gained nearly 10 per cent in the same period.
Spot gold was last at $1,359.75 (Dh4,993.34) an ounce at 0938 GMT, up from $1,345.80 late on Wednesday, but down from an all-time peak of $1,364.60 struck earlier in the day.
The price has risen by 3.2 per cent so far this week, its largest weekly rise since mid-April.
US gold futures for December delivery hit a fresh record high at $1,366 an ounce, before easing slightly to show a 1 per cent gain on the day at $1,361.00.
"We look at the reasons for holding gold and other precious metals and, above everything else, it is the idea of a store of value to protect against currency debasement," said Natixis strategist Nic Brown. "Whether you're undergoing quantitative easing or whether you're devaluing your currency against others, it all adds up to pretty much the same thing."
"As a consequence, governments are delaying any fiscal austerity, while monetary authorities are rolling out additional quantitative easing measures over and above the exceptionally low interest rates that are already in place, that is just good for gold."
Gold retreated from earlier highs after the world's third-largest producer of the metal, Anglogold Ashanti said it had completed the buy-back of its hedgebook, previously the largest in the industry.
But on a supportive note for gold, the central bank in key consumer Vietnam saying it would consider granting permits for gold imports, which have been banned for over two years, if domestic prices rose "unreasonably high".
Tight Asian market
"People are going to focus on the fact that Asian physical market will be tight. Last time Vietnam opened the door to gold imports, gold went up $20. In percentage terms, it could translate into $30 today," said a Singapore-based trader.
In more fundamental news for gold, the World Gold Council said it expects central banks to be net buyers of gold in 2011, for the first time in nearly two decades.
