Gold Rushes Toward Record

Updated from 11:10 a.m. EST

Gold prices rallied near record levels Tuesday on the back of rising energy prices, a weaker dollar and geopolitical worries.

Benchmark bullion contracts closed up $12.60 at $823.40 an ounce on the Comex division of the New York Mercantile Exchange. The move puts the price a hair below the record high settlement price of $825.50 reached Jan. 21, 1980, at the height of the Iran-hostage crisis.

That day almost three decades ago, gold also hit an intraday high of $875 before pulling back. This time, the session best was $828.

streetTracks Gold Shares(GLD Quote - Cramer on GLD - Stock Picks), the largest of the exchange-traded funds that hold inventories of bullion, was up 2.1%.

"High energy costs and a falling dollar are powerful drivers of inflation, and that undermines paper assets," says Andy Montano, director of precious metals at Toronto-based bullion bank ScotiaMocatta.

Gold is seen as a hedge against the value-withering effects of consumer price inflation, which itself tends to climb when oil prices rally. The metal is also popular as an investment during times of financial market turmoil and political turmoil.

Therefore, the limping dollar, which hit a new record low against the euro, and surging oil prices, gave gold a major boost. The euro reached an all-time high of $1.4571 earlier in the session and oil finished above $96 a barrel, up more than $2.

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