Gold surged to a new record high today as investors sought a refuge from the weakness in the US dollar.

The precious metal raced above the 1,200 US dollars an ounce mark, to a high of 1,217 dollars, having tested the psychologically important level for the first time yesterday.

Gold prices have rocketed in recent months in correlation to the difficulties suffered by the dollar, which has been hurt by fears over the US economy.

Investors with large dollar holdings - including countries’ central banks - have focused on gold as a safe haven.

The pound and the euro are both now close to year-high levels against the greenback, worth around 1.67 US dollars and 1.51 dollars respectively.

Michael Hewson, analyst at CMC Markets, said central banks in China, Russia and India had all looked to hedge their exposure to the falling dollar by buying into gold.

Improved access to the precious metal by small shareholders has also boosted its popularity.

“It is a store of value while investors have serious doubts about the global financial system,” he said.

“It is something that is not going to lose its value like a currency.”

The gold price is already climbing towards his prediction of 1,250 US dollars an ounce by the end of the year and he said there was “no reason” why it could not reach 1,500 dollars by the middle of next year.

Investors were given a further push into gold by news yesterday that a major player in the industry, Barrick Gold, had eliminated all of its price hedges.

Mr Hewson said this meant the firm believes the price of gold will not go down.

Another spur is thought to have come from the Dubai debt crisis as investors fear defaults in the wake of repayment questions at the city-state’s investment firm, Dubai World.