Gold hit record highs at $1,216.75 an ounce in Europe on Wednesday as investors bet on higher prices, with funds lengthening positions due to expectations of a fresh leg of dollar weakness and more central bank buying.

The metal also reached all-time highs in euro and sterling terms and a historic peak when priced in the Japanese yen, according to Reuters data, indicating independent gold strength.

Spot gold was bid at $1,211.05 an ounce at 6 a.m. EST, against $1,196.00 late in New York on Tuesday.

U.S. gold futures also hit a record at $1,218.40 an ounce. Gold for February delivery on the COMEX division of the New York Mercantile Exchange was later up $11.80 at $1,212.00.

The dollar edged up slightly against the euro on Wednesday, but analysts said with U.S. interest rates likely to remain depressed and risk appetite improving, the U.S. currency was set for further losses.

"Investors are sailing out of the safe havens into more risky assets, and this is weakening the U.S. dollar," said Peter Fertig, a consultant at Quantitative Commodity Research.

"The fact that stock markets are performing better and we have weakness in the U.S. dollar are supportive for precious metals, and from that perspective I believe this rally remains sustainable."

Investment interest in gold remained firm, with the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, saying its holdings rose 0.61 tonnes or 0.05 percent to 1,130.604 tonnes on Tuesday.

The holdings are approaching a record marked in June of 1,134.03 tonnes.

Gold also hit record highs in sterling terms and when priced in the euro.

Traders said options-related activity was also lifting gold toward fresh highs.

"At these levels the option strikes are the main focus," said Simon Weeks, head of precious metals at the Bank of Nova Scotia. "Yesterday there was a struggle around $1,200, and now that we are above there, there will be an increasing pull toward $1,250."

In the physical market, the flow of scrap gold re-entering the Indian market -- which usually increases when prices rise -- tailed off as sellers sought higher prices, dealers said.

Gold demand in India cooled on Wednesday as prices jumped to record highs. But while India was the world's largest bullion market last year, a dip in buying there is being easily offset by rising speculative interest.

Speculators bet on further buying by central banks, particularly in Asia, after many years of net official sector sales. India's purchase of 200 tonnes of gold, announced in November, sparked a 13 percent prices rally that month.

The move strengthened speculation that other emerging country central banks will follow suit, particularly China, which has the world's largest foreign exchange reserves worth $2.27 trillion, mostly held in U.S. Treasury bonds.

Strength in gold has lifted other precious metals. Silver and palladium rallied to their strongest levels since July 2008. Spot silver was later bid at $19.16 an ounce against $19.07, and palladium at $384.50 against $387.50.

Spot platinum rose as high as $1,493.50 an ounce, its highest since August last year. It was later at $1,480.50 an ounce against $1,478.50.