Gold leapt to a new high on Tuesday afternoon after the news emerged that India had been on a buying spree.
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 today by news that India's central bank had bought 200 metric tons of gold from the International Monetary Fund (IMF) in October.
As the news emerged of the purchase, gold broke into new territory, hitting a peak of $1,080.6 per troy ounce, before settling slightly lower. The jump beat the previous record of $1,070 per ounce seen midway through October.
Wednesday morning it turned higher still on dollar weakness, reaching a peak of $1,093.6 an ounce.
The move by India to diversify its foreign exchange reserves sparked talk that other central banks would follow suit.
Ben Coleman, commodities trader at ETX Capital, said: ‘Buyers for gold continue to squeeze the price higher spurred on by India’s record purchase. The question on trader’s lips’ is which central bank will buy next?’
The Reserve Bank of India played down the purchase after stating it was nothing more than part of its foreign-exchange reserves management operations.