■ Gold touches a fresh high of $1,518.6 per troy ounce

■ Prices for silver and diamonds also near record highs

THE PRICE of gold surged to yet another all-time high yesterday as growing fears over a weaker dollar sent investors scrambling for the safest asset class of all.

Gold hit an unprecedented $1,518.6 per troy ounce in morning trading yesterday. It eventually fell back to $1,507, although some traders predict it will hit $1,600 by the end of the year.

Silver also surged, with spot prices reaching $49.82 an ounce – close to the all-time high of $50.35 recorded in January 1980. It eventually fell back to $47.09.

The greenback has come under heavy selling pressure ahead of this week’s Federal Open Market Committee, with markets expecting chairman Ben Bernanke to reiterate his commitment to easy money.

Long-standing gold bug Jim Grant, the founder and editor of Grant’s Interest Rate Observer, said he was expecting a third round of quantitative easing in the US, which would propel gold to new highs.

The greenback also slid against commodity currencies, diving to a 29-year low of A$0.9291 versus the Australian dollar and a three-year low of C$0.9503 versus the Canadian loonie.

Analysts blamed the buck’s unpopularity on the Federal Reserve’s ongoing inflationary monetary policy, anxieties about US government debt and suggestions that China is moving to limit its exposure to the greenback.

BNP Paribas’ Ray Attrill said “it’s a weak dollar story”. “We don’t see any imminent reversal unless Mr Bernanke has got a rabbit to pull out the hat,” he added, referring to the Fed’s interest rate-setting decision.

Economists say that sky-high precious metals prices are here to stay as desperate investors rush towards perceived “safe havens” to escape the damaging effects of inflation.

The market has also been influenced by fears that China is planning several new investment funds to diversify its $3 trillion foreign reserves holdings, much of which is in dollars.

Diamonds are also reckoned to have reached record highs on the back of slowing production and increased demand from China and India, while WTI crude oil rose to over $113 a barrel due to ongoing fears about political turmoil in the Middle East.