Johannesburg — THE rand was the strongest emerging-market currency yesterday, gaining as much as 1,75% to R7,46/ after it benefited from a weaker dollar and a gold price that reached new highs.

The US dollar index, a gauge of the dollar value against six currencies, fell up to 0,8% after Federal Reserve Bank of St Louis president James Bullard said he supported extending the central bank's purchases of mortgage- backed securities.

Nedbank currency analyst Dave Gracey said the rand's strength "is all about the gold price and the weaker dollar", and the direction of the currency was focused on international factors.

The metal's price has climbed 32% this year, and 10% this month, while the US dollar index has declined 7,7%.

Low interest rates in the US and uncertainty in global financial markets contributed.

"Everything's working in the rand's favour at the moment," said Gracey.

Gold jumped to a record high in London and New York yesterday as the weaker dollar boosted its appeal as an alternative asset. Gold for immediate delivery rose 1,75%, to 1174/oz, in London. Gold futures for December delivery on the New York Mercantile Exchange gained 1,7% to 1165,80/oz, the seventh advance in a row. The central bank of Russia said it had bought gold last month.

"All this buying shows no confidence in the dollar. We're going to see demand in the festive season, which may push prices to 1200/oz," said Bernard Sin, head of currency and metals trading at bullion refiner MKS Finance.

Local producers welcomed the gold price surge but said it was neutralised by rand strength.

Gold Fields CEO Nick Holland said the higher price was "a welcome relief". Prices need to remain high for the industry to get real returns, he said.

DRDGold chief financial officer Craig Barnes said the rand strength offset gains in the dollar gold price. SA's gold mines were affected by higher costs for electricity and labour and greater risks in deep-level mines.

Harmony Gold CEO Graham Briggs said it was "extremely pleased" with the higher price.

Plexus Asset Management research head Johan Pyper said he was not positive about the prospects of local gold companies, especially those with assets only in SA. Although the dollar price of gold had gone up, the strength of the rand and escalating costs were eroding company profit margins.

Yesterday, in London, silver climbed 2,1% to 18,89/oz, a 16- month high, and platinum gained 1,9% to a 14-month high of 1473,75/oz.

Some central banks buying gold to boost foreign reserves as a hedge against a weaker dollar, and private investors exiting money markets, also contributed to the higher gold price.

"The rally should continue until central banks start increasing interest rates and, given the state of the world economy, this may take a while," Pyper said.