Gold hit record highs above $1,095 an ounce on Wednesday as dollar weakness added to momentum lent to the market by Indias purchase of 200 tonnes of gold from the IMF.

Gold is now poised to target the psychological $1,100 an ounce level, dealers said.

Spot gold struck a high of $1,095.05 an ounce and was bid at $1,090.40 an ounce at 1204 GMT, against $1,084.50 late in New York on Tuesday.

"At the moment, there is technical buying on the back of yesterdays rally in the aftermath of the IMF/India transaction," said Alexander Zumpfe, a trader at Heraeus.

"The transaction... reduced the amount of gold that can be sold under the CBGA by 50 percent for the first year.

Technically, it is looking good and it seems like the market wants to test $1,100 now," he added.

The IMF said on Tuesday it had sold 200 tonnes of gold to the Reserve Bank of India, half of a long-planned bullion sale that had threatened to slow golds ascent.

Market watchers are now speculating over the destination of the remaining 403 tonnes of gold the IMF has to sell.

"(The) implication is that at least one other central bank may be negotiating to buy gold from the IMF," John Meyer, an analyst at Fairfax, said in a note.

Weakness in the dollar in early European trade has added to this momentum, dealers said. The dollar index retreated from a one-month high on Wednesday as traders braced for a policy decision from the Federal Reserve.

Golds ability to reach record highs despite dollar strength on Tuesday has cheered the market, traders say.

"For the first time in a while gold rallied without the influence of the dollar, which is very bullish," said Afshin Nabavi, head of trading at MKS Finance.

Gold typically moves in the opposite direction to the dollar. Strength in the US unit makes gold, like all dollar-priced commodities, more expensive for holders of other currencies, and cuts its appeal as an alternative asset.