Gold inches down after touching a new record high

Gold inches down after touching a new record high as the dollar's rebound lowered the shiny metal's appeal as an alternative investment.

Recently, gold has benefited from many factors that sent prices higher, yet the question remains whether gold will be able to continue its rally.

One of the key factors that pushed gold prices is the remarkable rise in inflation, on the back of the climb in oil prices which were boosted by the unrest in the MENA region, especially in Asia, which forced many central banks to raise interest rate to halt price's rally. Yesterday, the Chinese central bank raised the bank's reserve requirements and said will continue further tightening to ease inflationary pressures.

In the euro area, the rise in CPI to 2.7% in February will probably prompt policy makers to raise borrowing cost over the coming few months to push the rate back to target. In the UK, at 4%, inflation is twice the desired 2% target and the 3% upper limit, which suggest that the BoE might raise interest rate soon.

Another factor is the dollar's weakness, where the dollar is bracing for the fifth monthly drop this month against a basket of major currencies, as depicted by the dollar index measure. The low interest rate on the dollar along with the large spending by the Fed caused the greenback to depreciate. The Fed left interest rate unchanged in April, but a rebound in the dollar may be expected after the end of the second-round stimulus in June.

Today, the dollar index rose to a high of 75.30 compared with the day's opening level of 74.89.

Third, the escalation in European debt crisis boosted demand on gold as a safe haven, where last week Moody's Investor Service lowered Ireland's credit rating to the lowest investment grade amid speculations that Portugal will get a bailout and Greece may not be able to avoid default.

However, how long the gold can continue rising depends on the aforesaid factors and development in them as well as physical demand on the metal.

Gold is currently trading above $1485 an ounce after recording all-time high of $1488.55 and a low of $1483.64, where oil also ticked down to touch a low of $108.53 a barrel relative to the day's starting level of $109.29.

Among other precious metals, platinum plummeted to $1784.00 from the day's opening of $1789.20, palladium retreated to $760.00 from $763.20 and silver edged down from 31-year high to $43.00 from $43.21, as of 08:10 GMT.