Gold Surges to Near Record Territory

The metal gains ground as the dollar slumps and investors bet inflation will rebound. Analysts see $1,000 an ounce on the horizon.

NEW YORK (CNNMoney.com) -- Gold prices charged higher Thursday, with another run at $1,000 an ounce looking increasingly likely, as the dollar remains weak and concerns about inflation boost demand for the metal.

Gold for August delivery rose $16.70 to settle at $982.30 an ounce after hitting an intra day high of $992.10 an ounce earlier this week.

The metal is up 11% from its mid April low of $869.50 an ounce as the U.S. dollar has tumbled against rival currencies. Gold and other commodities that are priced in dollars often gain ground when the greenback weakens.

The recent run up has raised bets that gold could top $1,000 an ounce for the third time ever. Gold rose to an all-time settlement high of $1,003.20 an ounce last year. It made another big push early this year, closing at $1001.80 an ounce Feb. 20.

In both cases, jittery investors flocked to the metal to preserve capital as the financial markets erupted in volatility.

This time around, however, gold is benefiting from concerns that the U.S. government's efforts to rescue the economy will result in higher rates of inflation. In addition to being a safe-haven, tangible assets such as gold are considered a hedge against rising prices.

Tom Pawlicki, a precious metals analyst at MF Global, thinks gold could top $1,000 as investors fret over the "funding demands of the U.S. government."

"Budget deficits create worries in the market that more money will have to be printed," he said. "The dollar will suffer in this environment."

The government has pumped billions of dollars into the economy to stabilize the financial system and revive the flow of credit, which has helped expand the nation's budget gap to unprecedented levels.

While inflation remains relatively tame, many analysts worry that it will become a problem as the economy recovers and the massive amount of liquidity in the market will have to be absorbed.

Looking ahead, Pawlicki said the rally could have some staying power, since large investment funds have shown renewed interest in the gold market following a mass exodus last year.

By Ben Rooney


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