Gold, whose two main drivers are jewellery and investment buyers, hit a record $1,195.13 an ounce on the London Bullion Market on Thursday.

The glamorous metal has won major support in recent weeks and months from a weak dollar, inflationary fears and increasing moves by central banks to diversify assets away from the greenback and into the commodity.

"It's all things coming together at the same time -- it's a perfect storm," Westhouse Securities mining sector analyst Mark Heyhoe told AFP, adding that gold could strike $1,300 by the New Year.

The metal has now surged by around 50 per cent in value over the past 12 months, gaining about 14 per cent in November alone.

"What we have had happen in the last three months is a marked change in how gold is being treated," Heyhoe said.

"We have got central banks starting to buy gold again, after the huge sales we had a decade or so ago, and these are particularly the Asian central banks."

Gold hit the latest record after a purchase of IMF gold by Sri Lanka's central bank, before pulling lower as shock news from Dubai rattled world financial markets.

The International Monetary Fund (IMF) announced Wednesday it had sold 10 tonnes of gold to Sri Lanka's central bank for $375 million as part of a restructuring of its financial resources.

India had bought 200 tonnes in October 30 for $6.7 billion and Mauritius bought two tonnes in November for $71.7 million.

"The IMF was selling gold, and we were expecting China to diversify out of dollars and increase their gold holdings, but actually India came in and bought 200 tonnes," Heyhoe added.

"That made people think there is more to this than just the effect of the weakening dollar."

A weaker greenback makes gold cheaper for buyers using other currencies, which tends to boost the metal's demand and eventually lift prices.

Earlier this month, meanwhile, the world's top gold producer, Barrick Gold of Canada, announced that it was reorganising its futures positions on gold.

Barrick decided to buy out its "forward" positions on gold -- deals to sell gold at a certain price at a certain point in the future -- because the actual price had soared even higher.

That gave a crucial clue that the gold industry's biggest player expected prices to rocket further.

"When you have got the world's biggest gold producer deleveraging at these prices, it's a strong indication that they think the gold price is going to go higher," added Heyhoe.

However, gold's latest record high point was eclipsed by news this week from Dubai.

By late Friday on the London Bullion Market, gold had pared gains on profit taking, to stand at $1,166.50 an ounce.

"Panic profit-taking on the broader commodity markets saw a very stark correction in gold prices, finally breaking the uptrend," said VTB Capital analyst Andrey Kryuchenkov.

However, he added: "The case for gold remains very bullish, with increasing rhetoric over central bank diversifications and US inflation expectations still running high as we go into 2010.

"We are witnessing a dramatically changing environment with bullion becoming one of the favourite investment vehicles within the investment community," said Kryuchenkov.

The metal draws strength from fears of higher inflation because it is regarded as a "safe-haven" investment in times of economic uncertainty.

"For hundreds of years, the yellow metal has been widely seen as a universal currency where countries across the world have sought the precious metal as a store of wealth and of preservation of power," said analysts at Fyshe Horton Finney stockbrokers in London.

"Gold has seen a surge in its fundamental value in recent times and has just recently hit record highs ... and analysts believe this could rise well into next year."