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
, 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.
Investors have increasingly piled into gold as the year has progressed, driving prices up from around $640 at the beginning of January, as problems with mortgage loans made to borrowers with shaky credit have come to the fore. The StreetTracks Gold Shares ETF now holds about 597 tons of gold, up from 493 tons at the beginning of the year.
Also helping the rally was the approach of Diwali on Nov. 9, as those celebrating the Indian festival of lights tend to give gifts of gold jewelry.
Turning to the technical analysis side of things, the chart watchers see bullish patterns across the board.
"We tend to focus on gold in dollars and many nonbelievers in gold say it's only a dollar weakness story," says John Roque, a technical analyst at Natixis Bleichroeder in New York. "But the charts tell a different story. Gold is bullish in all major currencies."
He says a price target of $1,100 isn't inconceivable.
Among the miners, the Amex Gold Bugs Index, which tracks stocks like
, advanced 4.4%, buoyed by the gold price.
Newmont gained 4.1%, while Randgold added 2.2%.