(Gold story updated to reflect price changes)



) --

Gold prices

broke to new highs Wednesday as investors bought the metal as protection against a weakening U.S. dollar.

Gold for December delivery was adding $25.50 to $1,372.20 an ounce at the Comex division of the New York Mercantile Exchange. The gold price Wednesday has traded as high as $1,375.70 and as low as $1,350.


U.S. dollar index

was slipping 0.39% to $77.06 while the euro added 0.29% to $1.40 vs. the dollar. The spot gold price was up $20.20, according to Kitco's gold index.

Gold prices were rallying hard after the

minutes of the last Federal Reserve policy-setting meeting

signaled that the central bank is ready to jump-start another stimulus program. The Fed governors downgraded growth prospects for the U.S. economy for the rest of 2010 and 2011.

Although there was no consensus, many participants agreed that "it would be appropriate to provide additional monetary policy accommodation," if the unemployment and inflation rates continued to be low. The Department of Labor will release key inflation indicators -- September's core producer price index and consumer price index -- over the next two days and both are expected to remain unchanged.

Gold prices had been struggling as investors took advantage of high prices and booked profits, but after the Fed minutes were released, gold started to pare its losses and has rallied to almost new record highs. Gold has now hit a new intraday high of $1,375.70 an ounce, easily surpassing its previous record of $1,366.

More accommodative measures mean the Fed will expand its balance sheet by printing more money to buy more government debt and literally pump more money into the system. As the Fed prints money, the dollar loses value, which is good for gold prices.

The dollar-backed commodity becomes cheaper to buy in other currencies, which rise as the dollar loses steam. In addition, the brewing global currency war, as countries rush to lower their currency values to increase export growth, highlights how frail paper money is and gold, a hard currency, becomes a more attractive place to protect wealth.

Currency issues and the race to debase might also see an additional push Wednesday after China reported that September exports rose 25.1% as its currency stayed low despite the country's announcement in June that it would let the yuan rise in value.

Wednesday's rally in gold is also triggering technical buying from traders who sold at record prices and are now looking to jump back in. Scott Redler, chief strategic officer at


, had recently gotten out of his macro longs in gold; he trades the

SPDR Gold Shares

(GLD) - Get Report

, which is only the second time he has done that in the last 3.5 years.

"Now I'm flat gold and I feel naked," says Redler. "If we were to start to break above the $1,360

area then I'll get in for another momentum trade ...

gold prices are starting to get violent ... the range is getting bigger, and I do think if we get above $1,365 that next move is going to be even more violent." Redler is now buying more gold on this breakout.

And Redler isn't alone. Large moves to the upside also suggest big buyers and hedge funds buying the precious metal.

The yield on the 10-year Treasury note was also rising as the government had to sweeten the pot to entice investors. Investors could be selling out of long-term Treasuries in favor of gold as the U.S. dollar continues to sell off.

Silver prices

were up 76 cents to $23.91 while copper was adding 4 cents to $3.82.

Image placeholder title

Gold mining stocks

, a risky but profitable way to

buy gold

, were popping.

Barrick Gold


was rising 2.1% to $49.47.

Newmont Mining

(NEM) - Get Report

was up 2% to $63.25 while

NovaGold Resources

(NG) - Get Report

was gaining 4.4% to $9.63.

AngloGold Ashanti

(AU) - Get Report

was up 2.7% to $48.05 and

New Gold

(NGD) - Get Report

was adding 4.3% to $7.36.


(IAG) - Get Report

was rising 3.3% to $18.31.

Harmony Gold

(HMY) - Get Report

was flat at $11.40 after receiving a downgrade at

Morgan Stanley

(MS) - Get Report

. The stock racked up another downgrade from

Normura Securities

to neutral from buy.


Written by Alix Steel in New York.

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