Gold rises as U.S. dollar falls

The price of gold reached $1,261.90 on Friday, its highest price level.

The euphoria which has sent gold rocketing began to simmer at the week's end as the U.S. dollar rally finally appeared to be waning.

Gold is priced in U.S. dollars so the price tends rise when the currency falls. The euro, quoted at near 1.18 not more than a week ago, was flirting with 1.24 Friday.

Gold is regarded as a safe-haven asset and its demand has been boosted by recent sovereign debt concerns particularly in Europe.

The precious metal was quoted near its record-high at $1,256.65 an ounce at 3:20pm Friday, a $13.25 gain on the previous day's close.

"I think it is a case of gold's ability to compete with both credit and equity markets for investments. Competing with credit markets has been in play for a long time, because of low interest rates and low opportunity cost of holding gold," Tom Pawlicki, precious metals analyst at MF GLOBAL in Chicago told Reuters Thomson.

"The (economic) data yesterday from initial claims and Philadelphia Fed was another thing indicating to investors that the economic recovery will be subpar compared with other recession recoveries. That makes gold more attractive," he said.

Gold is up nearly 15% this year. "Sovereign debt worries, central banks raising their holdings and record low interest rates keep attracting new buyers to gold," Saxo Bank senior manager Ole Hansen was quoted as saying by Reuters Thomson.

"The Goldilocks scenario continues. Risk-off helps gold through safe haven (buying), risk-on helps it as well through a weaker dollar."