Gold hits $1,200 an ounce

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NEW YORK (CNNMoney.com) -- Gold prices crossed $1,200 an ounce Tuesday and closed at a record high as dollar weakness and easing of Dubai debt fears pushed the precious metal higher.

U.S. gold futures for December delivery reached an intraday high of $1,202.70 an ounce before backing off and settling up $18 to $1,119.10.

"Concerns about geopolitical events have been pushing investors to seek safe-haven assets," said Carlos Sanchez, analyst at CPM Group. "Gold is seen as a hedge against that volatility."

Gold prices had fallen about 5% Friday on continued concerns about the state-run investment company of Dubai requesting a postponement of $60 billion in debt.

But on Tuesday, reports said Dubai World was in talks over $26 billion of its debt, easing worries it would default on the total balance. That relief translated into a blow for the dollar, as increased risk appetite pushed the U.S. currency lower.

A weaker greenback tends to boost gold, as it and other commodities are priced in dollars around the world.

The dollar also pared gains against the yen after the Bank of Japan said it will inject more liquidity into the financial system while holding rates at 0.1%.

The dollar's recent weakness has provided enough of a floor under gold prices that investors continue to buy the metal despite its high prices, said Sanchez.

But prices will likely cool soon and trade in a tight range before moving higher than $1,200, he added, noting that it took about one week for gold to move from $1,100 to $1,160 an ounce.

"I think a lot of market participants who are more short-term oriented are looking for specific levels, like $1,200," Sanchez said. "Prices could consolidate around current levels for a while, but we'll [end above] that threshold by the end of the year."

November 2009 was a golden month. Gold prices have risen more than 34% in 2009 so far. The metal was $890 an ounce on Jan. 2, and it fell to $818.90 on Jan. 15.

The next month saw a rapid rise, and gold prices closed at $1,004.70 per ounce by Feb. 23. But prices sank to $878.90 on April 7 and did not cross the $1,000 level again until Sept. 14.

Gold prices have marched upward since that time, despite brief dips in September and October. Since the start of November, prices have risen steadily.