London — Gold rose 1 per cent in Europe on Thursday as an expansion to the United Kingdom's quantitative easing program and the European Central Bank's decision to keep interest rates at record lows stoked fears inflation may rise.

Spot gold was bid at $970.30 (U.S.) an ounce at 1238 GMT, against $961.95 an ounce late in New York on Wednesday. U.S. gold futures for December delivery fell $6.30 to $972.60.

The ECB had been widely expected to leave rates unchanged at 1 per cent, but news that the Bank of England was to expand its quantitative easing program to £175-billion ($297-billion U.S.) from £125-billion surprised traders.

“The ECB and BoE actions suggest that central banks have still got the pedal to the metal, and people are starting to get worried about the banks having things too loose for too long,” said Citigroup analyst David Thurtell.

Gold, which is often seen as a key hedge against inflation, rose despite a climb in the dollar versus the euro in the wake of the news – a currency move that would normally pressure bullion prices.

Traders are now awaiting further direction from ECB chief Jean-Claude Trichet's remarks after the decision.