Gold Bugs Celebrate Again

Updated from 12:15 p.m. EST

Gold prices rallied to a new record close Wednesday as the dollar hit another all-time low against the euro.

December-dated contracts for bullion jumped $10.10 to close at $833.50 an ounce in New York. Prices for nearby futures weren't far behind, closing at $831 and decisively beating the prior spot price record of $825.50, set in January 1980. The market is still below the intraday record of $875, reached the same day 27 years ago.

Earlier in the most recent session, gold went to $848 an ounce.

There still seems to be no end in sight for the rally that has propelled the cost for one ounce of gold up more than 30% since the beginning of the year, with most of the action coming since the subprime problem got ugly this summer.

The bullion exchange-traded funds,

streetTracks Gold Shares

(GLD) - Get Report

and

iShares Comex Gold Trust

(IAU) - Get Report

, climbed around 1%.

"Yes,

gold is overbought, but I think that we are going to see it go higher anyway," says Clive Maund, a Chile-based technical analyst. "We could even see a parabolic spike."

He says that's likely because the dollar looks set to continue its fall. Typically, the prices of dollar-denominated assets, such as precious metals, increase as the U.S. currency weakens.

But some other observers are a little more sanguine.

"Fundamentally a price of $720 is what is justified based on jewelry market demand and scrap supply," says John Reade, precious metals strategist at UBS in London. Jewelry forms around two-thirds of overall demand for gold.

Still, even he says the price will be magnetically drawn higher until the records are firmly broken, although following that there may be a sharp pullback, he says.

The Amex Gold Bugs Index, which tracks a basket of miners such as

Barrick Gold

(ABX)

and

Kinross Gold

(KGC) - Get Report

, gave up early gains and closed down 1.8%.

Barrick, Kinross,

Hecla Mining

(HL) - Get Report

and

Newmont Mining

(NEM) - Get Report

all fell.