Gold rushes above $1,000 mark

Concerns about inflation and dollar send safe-haven metal soaring to highest level since February.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Julianne Pepitone, CNNMoney.com staff reporter

gold.mkw.gif
Click the chart to view other commodity prices.
Photos
10 countries, 10 solutions
A financial crisis has engulfed countries from the best-off to the worst-off around the world. The solutions to the problem are varied.
What would you do with $10,000?
  • Save it
  • Spend it
  • Invest it
  • Pay down debt

NEW YORK (CNNMoney.com) -- Gold prices surged past the $1,000-an-ounce mark Tuesday amid investor concerns about inflation and the weakness of the dollar.

The December contract on the New York Mercantile Exchange rose as high as $1,009.70, its highest level since February, before easing back to $1,006.40, up $9.70.

As the economic outlook remains bleak, gold has benefited. It's considered a safe-haven because precious metals tend to retain their value in times of economic stress.

Gold received an extra boost after a United Nations panel's Monday report criticized the U.S. dollar's position as the global reserve currency, said Mark Hansen, an analyst at CPM Group.

Tuesday's prices crossed an important threshold, but gold has been on the rise for months. Investors consider it a hedge against inflation, an attractive quality amid a swelling budget deficit and increased government spending.

"The safe-haven factor is very important," Hansen said. "The [gold] market hasn't fallen off like people expected it to -- like other markets did."

Gold's one-grand history: Gold soared above the $1,000 mark once in February, when investors worried that big banks such as Citigroup (C, Fortune 500) might need to be nationalized.

Before February of this year, the last time gold traded at such high levels was in March 2008 -- surging above $1,000 for the first time in history amid severely volatile financial markets. Gold hit a record high of about $1,014 in as the Federal Reserve and JPMorgan Chase (JPM, Fortune 500) boosted Bear Stearns, which was on the verge of collapsing.

But demand failed to hold prices above the psychological $1,000 mark, and gold tumbled to $720 an ounce in October as commodities markets slipped and the dollar rallied. Prices bottomed in November as the financial system began to collapse, and gold has risen choppily since then.

Outlook: CPM's Hansen said he expects gold prices will firm around the $1,000 mark. Within the next 1-2 months, he said, gold could rise as high as $1,100 per ounce. If Hansen's prediction is right, that would be an all-time record before inflation.

But in real dollars, gold is still well below its inflation-adjusted highs. Prices rose to $825.50 per ounce on Jan. 21, 1980, which is $2,186.50 in today's dollars, according to the Minneapolis Fed Calculator.

"If the gold price cements itself above $1,000, people will be encouraged to buy," Hansen said. "Before, investors might have been concerned prices were too high. A lot more players could be participating in the market soon."  To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
The 13 most WTF gadgets From the weird to the gross, these 13 gadgets will make you wonder why they even exist. More
Best-loved cars in America These cars and trucks topped J.D. Power's APEAL survey, which measures how much owners like their new vehicles. More
America's most powerful cars A new 'horsepower war' has erupted among U.S. automakers and these are the most potent weapons in their arsenals. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.