Spot gold hit a record high at US$1,172 (HK$9,141.60) an ounce in London before falling back to US$1,168.90 in mid-afternoon trade, compared with US$1,148.20 in New York late on Friday.

US gold futures rallied to record high of US$1,171 an ounce on the COMEX division of the New York Mercantile Exchange.

The US Dollar Index - a gauge of the greenback's value against six currencies - slid as much as 0.8 percent after Federal Reserve Bank of St Louis president James Bullard said he supported extending the central bank's purchases of mortgage-backed securities.

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The US dollar weakened broadly yesterday, hitting a six-week low against the yen after Bullard's comments affirmed expectations US interest rates will stay low for some time.

A low Fed funds rate will limit returns on many US investments, prompting investors to diversify out of the currency and seek other, riskier assets with higher yields.

The Fed is not alone - British Prime Minister Gordon Brown said the Bank of England and the European Central Bank have signaled they plan to keep interest rates low.

"All this buying shows no confidence in the dollar," said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance in Geneva. "We're going to see some physical demand in the festive season, which may push prices to US$1,200 an ounce."

Gold will likely advance to US$1,500 an ounce within the next 18 months, Bank of America Merrill Lynch said.

Copper surged to 14-month highs on as investors bet on economic and demand recovery. Three-month copper on the London Metal Exchange traded at US$6,970 a tonne from Friday's last bid of US$6,845 a tonne.

Oil prices rose more than 1 percent toward US$79 a barrel due to weakness in the dollar and signs of buoyant demand from China. US crude for January delivery rose US$1.11 to US$78.58 a barrel in London afternoon trade after rising to a day high of US$78.72 earlier.

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British PM looks to China: Page 16