LONDON (Commodity Online): Gold is just kissing distance from $1300 per ounce as the dollar sank after the US Federal Reserve hinted at more stimulus spending if the tepid US economic recovery cools further.

The yellow metal jumped to $1,293.35 an ounce on Wednesday at the London Bullion Market, after breaching $1,290 dollars on Tuesday.

A combination of a weakening dollar and the Federal Reserve indicating it may loosen monetary policy further is pushing gold to record highs.

While some are calling for it to run out of steam around the $1,300 level, the momentum still clearly remains to the upside.

The Federal Reserve said 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.

The Fed’s move closer to pump more money into the economy makes investors want to hold on to bullion as a hedge against
future inflation.

On the physical market, premiums in Hong Kong and Singapore were little changed despite high prices, with those in
Singapore being around 50 to 80 cents, a dealer based in the city said.

But in Tokyo, discounts for gold bars widened to $1 an ounce to spot London prices, from 25 cents last week, as holders cashed in on higher prices.

Spot gold is poised to rise to $1,305 per ounce, given a bullish momentum. Holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, fell to 1,304.168 tonnes by Sept 21 from 1,304.472 tonnes on Sept 20.

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