December gold has settled up $30.9, or 3 percent, at $1,084.90 an ounce on the New York Mercantile Exchange, after earlier reaching a new high of $1,088.50.

India's purchase of about 200 metric tons of gold is seen as a strong sign of demand for the precious metal and an indication that investors believe the price will continue to march higher.

India, along with China and Russia, have indicated interest in buying gold as a way to diversify their holdings in dollar-denominated assets as the dollar weakens.

Other precious metals have risen along with gold.
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