Tokyo - Gold hit a record high above $1 192 on Thursday as the dollar stumbled further and sentiment remained solid on expectations of more central bank buying of bullion.
The dollar extended losses on Thursday, falling to its lowest in 14 years against the yen and hitting a fresh 15-month low against a basket of six major currencies.
Gold prices have risen about 15 percent since the beginning of November, with demand fuelled by expectations of further reserve diversification, prospects for a sickly US currency and fears about inflation in 2010.
The market is highly sensitive to speculation of more bullion buying by central banks looking to diversify foreign exchange reserves, particularly in Asia, after a newspaper report that India is open to buying more gold from the International Monetary Fund following its purchase of 200 tonnes earlier this month.
The IMF had no comment on the report.
Late on Wednesday, the IMF said it had sold 10 tonnes of gold to the Central Bank of Sri Lanka, a part of 403.3 tonnes of sales approved by the fund's executive board in September. The fund has already sold 202 tons of gold to the Reserve Bank of India and the Bank of Mauritius.
"Everybody is bullish on gold, and everybody is looking at the signal central banks are sending," said Dick Poon, manager of precious metals at Heraeus in Hong Kong.
"It's not just India or China, but most of the central banks, as well as funds, have changed their portfolios to include gold. So, everybody is looking at how much money they will invest in gold," he said.
He said there was a lot of physical demand despite high prices, with Asian buyers seen in the market.
Spot gold hit a fresh record high of $1 194.70, up from New York's notional close of $1 190.30.
US December gold futures also rose to a fresh high of $1 194.80 per ounce. Futures settled up $21.20, or 1.8%, at $1 187.00 an ounce on the Comex division of the New York Mercantile Exchange.
Vietnam's central bank has granted quotas for the import of 10 tonnes of gold since lifting an import ban earlier this month, and 6.8 tonnes had already come in, state broadcaster VTV said on Wednesday.
Russia's central bank bought 15.6 tonnes in October and has said it aims to increase gold's share in its reserves this year.
"These moves further add to market speculation that central banks will continue to buy gold," said Wakako Harada, a senior trader at Mitsubishi Corp in Tokyo.
US markets will be closed on Thursday for the Thanksgiving holiday.
"Reserve diversification moves by non-G7 central banks underscore investor detachment from dollar assets and is clearly reflected in gold's rally," said Shuji Sugata, a manager at Mitsubishi Corp Futures' research team.
Traders said volume was not large, with many players kept to the sidelines due to the Thanksgiving holiday.
Yuichi Ikemizu, Tokyo branch manager for Standard Bank, said he did not expect strong follow-through buying, as players were likely to become cautious with the US on holiday.
"But sentiment is underpinned by speculation about central bank buying of gold, with many believing India will buy more from the IMF. And the dollar's weakness is also supportive," he said.
With many market players expecting gold's bull run to continue, investment in gold increased.
The world's largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1nbsp;127.860 tonnes as of November 25, up 5.489 tonnes, or 0.5 %, from the previous day and just shy of a record 1 134.03 tonnes hit on June 1.
- Reuters