GOLD HITS NEW HIGH OF $1040 AN OUNCE, AFTER MONDAY'S REPORT THAT 4 NATIONS WON'T USE U.S. DOLLARS TO BUY OIL. OTHER METALS UP.

LONDON, Oct 06, 2009 - Gold prices hit a high of above $1,040 a troy ounce on Tuesday, propelled by investors seeking an alternative to the US dollar and a haven for their savings, traders and hedge fund managers said.

The dollar suffered after Australia’s central bank unexpectedly raised interest rates, prompting investors to dump the dollar in favor of higher yielding currencies.

Gold also rose when denominated in other currencies, including the euro and sterling, suggesting that other factors were at play on top of the dollar weakness.

Lower-than-expected gold sales from European central banks also supported the market. The World Gold Council, an industry-backed body, said European central banks sold 155 tonnes in the 2008-09 year, far below a limit of 500 tonnes.

Traders said gold buying was widespread and not confined to the traditional players in the precious metals market. “We are witnessing strong volumes,” a senior trader in London said. Sellers were extremely reluctant, he added.

Nick Moore, head of commodity strategy at Royal Bank of Scotland in London, added that gold had proved itself not to be the barbaric relic that John Maynard Keynes described “but has come of age during this crisis as a serious component to an investment portfolio”.

Since the collapse of Lehman Brothers in September 2008, bullion prices have surged 42 per cent.

In London, spot bullion hit an intraday high of $1,043.45 an ounce, up 2.6 per cent from New York’s last quote on Monday of $1,016.75 an ounce.

The surge boosted miners’ shares. The S&P/TSX global gold index, which tracks mid-to-large size gold miners in several markets, rose 5 per cent by midday trading.

Gold’s advance lifted other precious metals, with silver up 4.3 per cent to $17.3 an ounce ounce, platinum adding 1.7 per cent to $1,315 a troy ounce and palladium hitting the $306.5 a troy ounce mark, up 2.7 per cent.