Gold continued its bull run for the third day yesterday reaching its highest ever price of $1093.65 an ounce before sliding down to $1091.93, adversely impacting jewellery sales in Dubai.

As investors were blamed for having driven up the gold prices, those involved in retail sale said high gold prices will hit their business.

"Retail jewellery sales are already down by about 40 per cent. The resurgent rally in gold price may further dampen our sales by another 20 per cent from the current levels," said Sanjay Jain of Al Mowaiji Jewellers company.

Those dealing in silver jewellery reported a slight beefing up of demand.

"We have seen a rise in demand as winter is approaching," said Jaisal from Karachi jewellers.

The bullion has been rising ever since the International Monetary Fund (IMF) announced that it is selling 200 tonnes of gold to Indian central bank . The bullion's price has risen by $50 gaining almost 3.3 per cent in a span of two days.

Gold market insiders said that there is just one direction for gold for a visible future now –"up". The rise in gold prices came yesterday setting aside the traditional inverse correlation of gold with the US dollar. The Greenback strengthened yesterday and traded at $ 1.4750 against the Euro.

"This rally in gold prices indicates a global diversification away from the US dollar. The Indian central bank's action indicates a growing tendency among the central banks to diversify," said Binod Shankar, a Dubai- based financial analyst.

Traders in Dubai, however, refused to believe the recent spur in prices comes as a result of the IMF-India deal. "Prices had been at the levels of $ 10530- $1060 even when there was no news of the sale," said Harish Pawani, a Dubai-based jeweller.

IMF plans to sell 403.65 tonnes of gold and has now just sold half of the amount. Pawani allayed apprehension that there will be another strong rally if monetary organisation disposes the second tranche of the fund.

"Prices would rally just because of IMF sale if the sale is made to investors which is not likely. Gold prices are expected to continue to rally but the core reason behind it will be investment demand," said Pawani.

Analysts said the bullion could rise to the levels of $1200 to $ 1500 an ounce considering the current trend. "While we still see a possibility of gold sliding off to $980 an ounce levels, there is a 70 per cent of gold rising instead of declining," said Anoop PS, Assistant Vice-President with JRG International Brokerage DMCC.

Anoop said the ongoing rally is an extension of an upswing in gold prices that fermented earlier.

Other precious metals prices are following gold. Silver, the best performer among precious metals this year, traded at $17.45 a troy ounce, up 6.2 per cent.

Platinum and palladium reacted in a sublimed manner to the hike in gold prices. Platinum reached $1,363.50, up 2.3 per cent over the past two sessions while palladium hit $331.50, up 3.1 per cent over the same two sessions.

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