Gold price hits new record at $US1100

The price of gold hit a record high above $US1100 ($A1207) an ounce in trading on Friday following a report that Sri Lanka had joined India in buying the precious metal in favour of US dollars.

"The Central Bank of Sri Lanka has announced that it is buying gold to diversify its reserves," industry body the World Gold Council (WGC) said in a statement issued before gold struck a record high of $US1101.42.

It later pulled back to stand at $US1092.65 ($A1199) an ounce in late London trading.

Gold had struck a series of highs already this week after the IMF said it had carried out a huge sale of the precious metal to India.

"Over the past year central banks, which have been net sellers of gold are now a new and increasingly important source of demand," WGC chief executive Aram Shishmanian said in the council's statement.

"This latest announcement demonstrates that many central banks are reassessing their reserve asset management policies."

Gold had reached a record high of $US1087.80 ($A1193.68) on Tuesday as the IMF said it had sold 200 tonnes of gold to India's central bank over two weeks last month for $US6.7 billion ($A7.35 billion) to bolster its finances.

Gold and other commodity prices have surged in recent months amid a move away from the dollar, which has been slumping. The move accelerated last month on a report that Gulf states may stop using the greenback for oil trading.

The metal is also winning support from fears over a possible spike in inflation, as gold is widely regarded by investors as a safe store of value.

The sale to India was nearly half the 403.3 tonnes of gold that the IMF has targeted for sale over the coming years.

The Washington-based IMF, which holds 3217 tonnes of gold, is the third-largest official holder of the metal after the US and Germany.

India is the world's biggest consumer of gold, importing between 700 and 800 tonnes every year or 20 per cent of global demand.

A senior IMF official said the IMF was "lucky" in selling the 200 tonnes to India for roughly $US1045 ($A1146.71) an ounce, compared with $US850 ($A932.73) an ounce in April 2008.