GOLD prices hit a record high of $1,040 an ounce on Tuesday as renewed speculation about the declining power of the dollar as the world's reserve currency sent investors stampeding into commodities.

Reports that secret talks had been held between China and Middle Eastern states about changing the pricing of oil from dollars to a basket of currencies and gold sent the greenback into a renewed slide on foreign exchange markets, despite denials from the governments involved.

By late afternoon the euro was up by 0.7 per cent against the dollar at $1.47. Since the credit crisis, there has been growing debate about the role of the dollar as the world's reserve currency, which has helped America to borrow cheaply from the rest of the world for decades.

World Bank president Robert Zoellick warned last week that the US could not take the dollar's status for granted. “Looking forward, there will increasingly be other options,” he said, and warned that confidence in the dollar would depend on how successfully Washington managed to deal with its deficits, and fix the world's largest economy without unleashing a bout of inflation.

Steps have already been taken to loosen the dollar's grip Iran has begun pricing oil exports in euros; China recently launched the first yuan-denominated bond open to outside investors in a step towards making its currency exchangeable on international markets; and Asian central banks are piling reserves into gold as well as the Treasury bills that have been the favoured investment for the past decade.

China, Russia and other emerging market governments have complained bitterly at international gatherings about the overweening economic power of the US. “Throughout this year, China has questioned the dollar as the medium of exchange, and questioned the dollar as a store of value,” said Gerard Lyons, chief economist at Standard Chartered bank.

China and other developing countries that have earned a vast bounty by exporting cut-price consumer goods to the US over the past decade have been infuriated by the way the collapse of America's banking system has sent shockwaves throughout the world economy.

It would probably take many years for the dollar to be replaced. China and the Middle Eastern oil producers are also still holding huge dollar-denominated reserves, so that they would suffer from a sudden decline in the value of the greenback.

— The Guardian, London