Gold scraped its mid-October high yesterday on the back of a weaker greenback, with the bullion trading at $1,061.40 an ounce at the time of writing this article.

It touched a high of $1,065 an ounce earlier in the day. Until late last week, the bullion was trading at the levels of $1,043 to $1,045 an ounce.

The current rally, supported by a scramble among investors and fund managers to safely park their money away from the influence of a weakening dollar, saw gold rising by more than $20 in a span of 12 hours.

"The $20 move was primarily US dollar weakness-related and overall gold still looks firm and the dollar vulnerable to further weakness," said Alison Burns, the Head of Precious Metals (Mena) with Standard Bank.

The greenback stood at $1.46 against euro yesterday.

While gold's ascend began earlier in the week, the rise coincided with the purchase of 200 tonnes of gold by India. The International Monetary Fund (IMF) said it sold 200 metric tonnes of gold to the Reserve Bank of India. This is the first such sale by IMF to India in nine years. In fact, a sale of such magnitude, amounting to hundreds of tonnes to a government holding, have not been witnessed in the past 40 years.

The monetary value of the sale stands at about $6.7 billion (Dh24.6bn) and the volume of sale is half the total amount (403.3 tonnes) that the IMF earlier announced it wants to dispose of to developing countries to help them strengthen their reserves.

Dubai-based commodity dealers pointed out that more investors are putting their money into gold as a hedge against future inflation, pushing gold prices up.

"All fund managers have begun to secure their investments by parking their money into gold. There is an all-round loss of confidence in the dollar and gold is [once again] being considered a hedge against further drops in the value of dollar. This is particularly in countries where the financial year draws to an end in December," said Sajith Kumar PK, the CEO of Dubai-based JRG International.

Burns said: "Resistance (the high gold can rise to) now is still $1,070 an ounce and on downside $1,050 an ounce." Analysts at MF Global said in their report that, in the medium term, any price rise above $1,065 an ounce will make way for the levels $1,072 and $1,080.

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