Gold rings in record high

NEW YORK (CNNMoney.com) -- Gold prices surged into record territory Wednesday as lingering geopolitical concerns and a spike in oil prices fueled demand for the precious metal.

The price of gold jumped $23.30 to $861.30 per ounce by mid-day Wednesday after settling at $838 on Monday on the New York Mercantile Exchange.

"With global uncertainties, a big rise in crude prices and stocks wobbling, people are having memories of 1980," said Jon Nadler a Senior Analyst at Kitco Bullion Dealers in Montreal.

Gold prices reached a record high of $825.50 in January of 1980, amid a similar combination of geopolitical turmoil and high energy prices. But that record was topped in November, as oil prices and a weak dollar drove gold prices to a settle price of $833.50 per ounce.

Nadler thinks that gold's current rally is being fueled by global uncertainties highlighted by the assassination of former Pakistani Prime Minister Benazir Bhutto last week.

Investors are wary of political instability and tend to flock to safe-haven investments like precious metals when signs of unrest become apparent.

Meanwhile, crude prices pushed past $100 a barrel Wednesday. The record breaking run was sparked by violence in oil-rich Nigeria, anticipation of another dip in domestic stockpiles and a halt in crude imports from Mexico.

In addition to global uncertainty and surging oil prices, concerns about the domestic economy are also supporting gold's rally.

The Institute of Supply Management said Wednesday that manufacturing activity unexpectedly declined in December. The report raised questions about the possibility of another Federal Reserve interest rate cut and concerns that the country may slip into a recession.

Nadler thinks the situation could change but sees more volatility in the first half of the year, with big swings in the price of gold becoming commonplace.

"We're entering uncharted territory, we'll have to see how sustainable it is," he said.