Gold price tops US$1,090 for first time

Gold had already reached a record high of US$1,087.80 on Tuesday as the IMF said it had sold 200 tonnes of gold to India's central bank over a two-week period last month for US$6.7 billion to bolster its finances.

After spiking to a new high Wednesday, gold pulled back slightly to stand at US$1,091 in London morning trade.

Gold and other commodity prices have surged in recent months amid a move away from the dollar, which has been slumping. The move accelerated last month on a report that Gulf states may stop using the greenback for oil trading.

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

Bart Melek at BMO Capital Markets said the big sale of gold to India gives credence to the theory "that there are official buyers waiting in the wings for large amounts of available gold.

"The question now is, who buys the rest of the IMF gold?" Melek said in a note to clients.

"We suspect it may be China, other Asian countries, Russia or even India again, as they hold relatively little gold relative to their very large foreign exchange reserves, and may want to diversify away from US dollars."

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

The Washington-based IMF, which currently holds 3,217 tonnes of gold, is the third-largest official holder of the precious metal after the United States and Germany.

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

A senior IMF official said that the IMF was "lucky" in selling the 200 tonnes to India for roughly US$1,045 an ounce, compared with 850 dollars an ounce in April 2008.

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