Gold still powering past $1,000

NEW YORK (CNNMoney.com) -- Gold prices settled Wednesday at their highest point as the dollar slumped and inflation concerns boosted demand for the metal as a hedge against rising prices.

Gold for December delivery, the most active contract, settled at $1,020.20 an ounce, up $13.90 from Tuesday's close of $1,006.30 per ounce.

December gold hit an intraday high of $1023.30 on Wednesday. That's about $10 below the highest intraday price, set on March 18, 2008, when it traded as high as $1,033.90 an ounce.

Mark Hansen, director of trading at commodities research firm CPM Group, said the weak dollar is the "main driver" of Wednesday's gold rally.

The dollar fell to a one-year low against a basket of currencies, as upbeat economic data boosted optimism about the global economic recovery and gave investors an appetite for more risky assets, such as stocks.

At the same time, gold prices are being supported by concerns that government efforts to stimulate the economy could result in a bout of inflation a few years from now. "That has given investors more of an appetite for tangible assets," Hansen said.

The inflation concerns come despite a government report that showed consumer prices remained relatively tame last month.

The Labor Department's Consumer Price Index rose 0.4% in August from the month before due to higher energy prices. Over the past 12 months, CPI has declined 1.5%.

"Because inflation is really not an issue now, investors are looking out a year or two and wondering what happens if there's not a timely withdrawal," of economic stimulus dollars, Hansen said.

Investors view gold as a hedge against rising prices because tangible assets tend to hold value better than equity-based assets when inflation is an issue.

Looking ahead, gold prices could head even higher, Hansen said.

Market participants have become "more comfortable" with gold prices above $1,000 and that has "emboldened investors to think that market can go higher," he said.