Mumbai: Gold prices rose to the highest in 16 months on speculation the US Federal Reserve would cut benchmark interest rates to head off a possible recession, even as a dollar fall fuelled demand for gold.

Spot gold gained $2.27 at $720.17 an ounce in London, the highest since May 2006.

The Fed will announce its rate decision at 2:15 pm in Washington, along with an accompanying statement on the outlook for inflation and growth.

Gold has risen 7.2 per cent in London this month as a crisis in the US subprime mortgage market weakend the economy, pushing the dollar down 1.7 per cent to a record low versus the Euro.

The Bank of England on Monday said it would offer $8.77 billion to shore up confidence in UK banks and mortgagers amid spreading turmoil in global credit markets.
also see : General reports on Investments