THE price of gold yesterday surged to a new seven-week high of above dollars615 an ounce, boosted by nervous investors piling into the safe-haven asset as they observed a weaker dollar and the deteriorating state of the US economy.

The dollar's slump, which hit a five-week low against the euro and a near three-month low against the pound yesterday, came after lacklustre PMI and US consumer confidence data, reigniting speculation the Federal Reserve could start cutting interest rates next year.

US manufacturing growth came close to stagnating in October as a housing-led slowdown hurt demand across a variety of sectors, according to reports out yesterday.

Moreover, weak construction spending and pending home sales data suggested the housing market's misfortunes were far from over, and its effects were being felt in other areas of economic activity.

At the close of play, gold closed in London at dollars615.20 per ounce, up from dollars605.10 the previous day, its highest level since early September.

Constanza Jacazio, an analyst at Barclays, said: "The weaker dollar was the trigger for the move higher in gold prices."

Jacazio added that the outlook for gold looks strong after the metal broke above the dollars610 mark, although whether the rally is sustained or not will depend on the dollar remaining weak and oil prices pushing higher.

"If oil prices were to rise, that might boost gold prices, but if they stay close to their recent low levels that could dampen sentiment, " she said.

Meanwhile, sterling hit its highest point against the dollar in almost three months.

In late trading, the pound stood at dollars1.9137. A rise above dollars1.9144 would take sterling to its highest level against the dollar in 18 months.