MercoPress. South Atlantic News Agency

Gold at all time record following India’s purchase of IMF metal reserves

Gold prices have surged recently as investors move away from the US dollar.

The price of gold has touched an all-time high after a large sale of the precious metal by the International Monetary Fund (IMF) to India. Gold struck a high of 1,095.05 an ounce in London, against 1,084.50 late in New York on Tuesday.

While the precious metal has pulled back from recent peaks in the last few weeks, this week has seen a dramatic surge initially driven by renewed fears about the cost of bailing out the banking sector.

This move was exacerbated by news that India's central bank had bought 200 metric tons of gold from the International Monetary Fund (IMF) in October. Gold and other commodity prices have surged recently as investors have moved away from the US dollar.

The sale to India was nearly half the 403.3 tonnes of gold the IMF has targeted for sale over the coming years.

The move by India to diversify its foreign exchange reserves sparked talk that other central banks would follow suit. The Reserve Bank of India played down the purchase after stating it was nothing more than part of its foreign-exchange reserves management operations

The Indian finance minister, Pranab Mukherjee, reportedly said: 'I would have advised the governor of the Reserve Bank of India (RBI) to buy gold as our forex reserve is comfortable. The RBI has done just that. That doesn't mean we don't prefer dollar any more or like gold any better.'

Gold has long been a favourite of analysts and commodity specialists who have said that the unprecedented stimulus packages seen around the globe would weaken currencies and push central banks towards alternatives.

Fears of a sharp rise in inflation following the expansion of money supply in developed countries have also contributed to the price rise.

However the price of gold is typically strong in the October to December period because of the higher demand for jewellery in the run-up to Christmas and the Indian festival of Diwali.