Gold surges, hits new all-time high of $1,045

NEW YORK — Gold prices surged to a new high Tuesday as investors sought a safe harbor from a falling dollar and inflation.

Gold for December delivery rose to as high as $1,045 an ounce, surpassing a previous intraday high of $1,033.90 logged in March 2008, just days after Bear Stearns Cos. collapsed.

Gold also had a record high closing price, finishing the day at $1,039.70 an ounce, up $21.90, or 2.2 percent. Some analysts see gold rising to $1,100 in the coming days.

Gold’s advance was stoked by a tumbling dollar, which hit a 14-month low against the Australian currency after Australia became the first major country to raise interest rates since the onset of the financial crisis.

The move signals that Australia believes its economy is strengthening enough to withstand a slight increase in borrowing costs, and made the Australian currency a higher-yielding and thus more attractive investment to fund managers versus the U.S. dollar.

The Federal Reserve has said it plans to keep U.S. interest rates at a record low of near zero for some time as one of several tools it’s using to shore up the U.S. economy.

Adding to the dollar’s woes Tuesday was a report in a British newspaper that Arab states, along with China, Russia, Japan and France, were in talks to move away from using the dollar for oil trading. Several countries denied that such talks were occurring, however there has been much discussion recently about the dollar’s role as the world’s reserve currency eventually fading.

“People are very nervous about the decline of the dollar,” said William Rhind, head of sales and marketing at ETFS Marketing LLC, the U.S. arm of ETF Securities. Gold is used as a hedge against inflation, which can be triggered by a falling dollar.

The dollar has weakened considerably this year amid low interest rates and massive government spending designed to spur the economy, which in turn has been a boon to commodity prices. Commodities are priced in U.S. dollars, so a weak greenback makes them more attractive to foreign investors.

Most analysts say the dollar has further to fall, which should support higher commodity prices for the foreseeable future.

“I think the case for gold is pretty bulletproof right now,” said Joe Foster, portfolio manager of the Van Eck International Investors Gold Fund. “Given that we’re at new highs now, I think the next target the market will be looking at is $1,100.”

Darin Newsom, a senior analyst at DTN in Omaha, Nebraska, cautions that gold might not be able to continue to climb at such a fervid pace.

“Who’s going to say that looks like a value to me?” he asked. “You usually don’t buy high … but we’ll see if it can continue to draw the money in.”

Though it was the highest close for gold on record, the price is still a long way off from an inflation-adjusted peak of about $2,200 set in January 1980, when prices hit $850 an ounce, according to the World Gold Council, an industry trade group.

Other metals rallied along with gold on Tuesday. December silver spiked 76 cents, or 4.6 percent, to $17.2950 an ounce — its highest close in nearly a month. October platinum rose $23.50 to $1,318.10 an ounce.

Among industrial metals, December copper futures rose 5.75 cents, or 2.1 percent, to $2.7845 a pound.

The sharp rise in gold and other commodities drove shares of material companies higher, helping to lift the broader stock market. The Dow Jones industrials rose 132 points, bringing its two-day advance to 244 points. All the major stock indicators rose at least 1.4 percent.

Oil prices also benefited from the weak dollar. Light, sweet crude rose 47 cents to settle at $70.88 a barrel.

In other Nymex trading, heating oil rose 2.26 cents to $1.8142 a gallon and gasoline rose 1.88 cents to settle at $1.7727 a gallon.

Natural gas for November delivery lost 10.7 cents to settle at $4.88 per 1,000 cubic feet.

Grain prices surged on the Chicago Board of Trade. December corn futures soared nearly 5 percent, gaining 16.75 cents to $3.5825 a bushel.

December wheat futures jumped 17.5 cents, or 4 percent, to $4.6025 a bushel, and November soybeans rose 25 cents, or 2.8 percent, to $9.10 a bushel.

Among soft commodities, cocoa prices retreated after hitting a new contract high on Monday. The December contract lost $29 to $3,211 a ton. Sugar prices also fell, while cotton and coffee prices rose.

(This version CORRECTS Corrects figure for change in gold price in graf 3; gold sted dollar rising to $1,100.)