Source: AFP

Gold hit a fresh record above 1,290 dollars on Wednesday as the dollar sank after the US Federal Reserve hinted at more stimulus spending if the tepid US economic recovery cools further.

The metal jumped to 1,293.35 dollars an ounce at 0650 GMT on the London Bullion Market, after breaching 1,290 dollars late Tuesday.

“A combination of a weakening dollar and the Federal Reserve indicating it may loosen monetary policy further is pushing gold to record highs,” ETX Capital senior trader Manoj Ladwa told AFP.

“While some are calling for a it to run out of steam around the 1,300-dollar level, the momentum still clearly remains to the upside.”

The Federal Reserve said Tuesday that it was prepared to take new stimulus measures if necessary to keep the US economy on track while leaving interest rates at record lows.

The news sent the dollar reeling against the euro and the yen.

A weak dollar stimulates demand for dollar-priced gold, which becomes cheaper for buyers using stronger currencies. In turn, that tends to push prices higher.

CMC Markets analyst Michael Hewson predicted that gold would eventually reach 1,300 dollars.

“Perceptions that the Fed will look to further ease monetary policy into year-end will underpin gold and help push it above 1,300 dollars as investors seek better stores of value,” Hewson said.