Gold surges to a record high
The precious metal jumps to settle at an all-time high as the U.S. dollar declines.
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| Click the chart for current gold prices. |
NEW YORK (CNNMoney.com) -- Gold jumped to an all-time high Wednesday as the dollar depreciated, fueling demand for the metal as a hedge against the anemic greenback.
December gold climbed $12.10 to settle at a record high of $1,114.60 an ounce after hitting a record trading high of $1,118.60 an ounce earlier in the session.
"Overall we're still seeing strong investor interest," said Carlos Sanchez, precious metals analyst at CPM Group, adding that gold's recent rally has attracted many "short-term market participants."
Prices surged early in the session as the dollar weakened on expectations that U.S. interest rates will remain low for an extended period of time.
Gold pared gains later in the session as the dollar recovered some ground but remained near a 15-month low against rival currencies.
The dollar index (DXY), which gauges the greenback's value against a basket of currencies, was up 0.1% to 75.11.
Despite the dollar's modest rebound, the currency market remains focused on the bleak outlook for the U.S. currency.
"The dollar continues to weaken," Sanchez said. "That's because of concerns over loose monetary policy and fiscal stimulus that is increasing money flows into financial market and the economy."
A softer dollar makes commodities that are priced in dollars such as gold cheaper for investors using other currencies.
The weak greenback has also raised concerns among many foreign central banks, since the dollar is the traditional global reserve currency. As a result, some overseas monetary policy makers are said to be looking for ways to diversify away from the dollar.
Last week, the Indian central bank bought 200 metric tons of gold from the International Monetary Fund. That raised bets that more central banks could increase their holdings of the precious metal as an alternative to the dollar.
Gold prices are also being supported by concerns about inflation. While consumer prices remain subdued, some traders say U.S. monetary and fiscal stimulus policies could spur a bout of inflation in the future.
Tangible assets like gold tend to hold value better than other types of investments when inflation is a problem. 
