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India Drives Gold Higher

India drives gold prices higher to new record.
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Updated with new record high gold price.



) -- India sends

gold prices

to a new high of $1186.

The Reserve Bank of India announced that it will consider buying the IMF's remaining stash of 201.3 tons of gold igniting gold prices. Central bank purchases often trigger momentum buying as investors

invest in gold

as an alternative asset.

Currently India has only 6% of its reserves in gold, after

buying 200 tons

from the IMF in early November. At one point the country had 20% and countries like the U.S. and Portugal have 70% and 90% respectively. India's 6% seems paltry in comparison. "Every time any kind of news comes out its instantaneously regarded as this is it, this is bullish, must be great" says Jon Nadler, senior analyst at

India is paying up for gold buying the first 200 tons at a spot price of $1,045 and now considering buying the rest as gold inches towards $1,200. But Nadler thinks that India could be buying in order to play a larger role in the IMF as a voting member and that buying gold has less to do with a bullish outlook and more to do with keeping reserves in line with allocations. "Central banks in general look at foreign reserve management as an ongoing policy. They will buy when they feel the allocation is too small vis a vis reserves. Price is really not the issue it's a percentage issue."

Even though India represents a shift from central banks away from being net sellers of gold to being net buyers, it's still the weak U.S. dollar that is

pushing prices to $1,200

. "I think a lot of what is driving gold in the very near term is part of this weak dollar risk trade element and therefore I think having an extra bit of news like India coming through has driven the price even higher", says Nicholas Brooks, head of research and investment strategy for ETF Securities. "When central banks start looking at gold as a good diversifier away from the dollar it just confirms private investors' concerns about the types of policies put into place by governments right now."

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U.S. dollar index

was lower by .67% to $74.59. This comes after the

Federal Reserve released minutes

from its

Open Market Committee

meeting earlier in November saying that economic conditions were "likely to warrant exceptionally low

interest rates for an extended period."

Gold delivery for December was skyrocketing $13.30 to $1,179.10 an ounce at the Comex division of the New York Mercantile Exchange. Prices have traded as high as $1,183.40 and as low as $1,168.

Silver prices were rising 16 cents to $18.61 while copper was adding 2 cents to $3.13.

In mining stocks,

Barrick Gold


was rising 1.43% to $43.65 while

Newmont Mining

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was adding 1.52% to $54.12. Shares of

Freeport McMoran Copper & Gold

(FCX) - Get Freeport-McMoRan, Inc. Report

were relatively unchanged at $86.04 while

Yamana Gold

(AUY) - Get Yamana Gold Inc. Report

was higher by 1.25% to $13.75.Shares of

SPDR Gold Shares

(GLD) - Get SPDR Gold Shares Report

were flat at $115.64. The physically backed ETF added another ton on Tuesday.

Market Vector Gold Miners

(GDX) - Get VanEck Gold Miners ETF Report

was rising 1.22% to $52.15 while shares of

Market Vectors Juniors

(GDXJ) - Get VanEck Junior Gold Miners ETF Report

were popping 2.06% to $27.70.

>>Slideshow: How to Invest in Gold


Written by Alix Steel in New York