Gold prices surged through the psychologically important $900-dollar level Thursday on continuing concerns that interest rate cuts by the Federal Reserve will lead to higher inflation.

Contracts for February delivery of bullion were gaining $21.90 to $905 an ounce on the Comex division of the New York Mercantile Exchange.

"There is a realization that the Fed is more interested in boosting the economy than in fighting inflation," says George Gero, vice president of global futures at RBC Capital Markets in New York. "As long as we have rate cutting and the stock markets keep rallying, gold prices will continue to rise."

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Loose monetary policy, in the form of lower short-term interest rates, tends to increase the supply of paper money and typically eventually leads to a general rise in the cost of goods and services in the economy. In turn, that tends to prompt investors to buy gold as a long-term hedge against inflation.

In addition to that, Gero says, the metal is now attracting growing interest from funds specializing in momentum plays.

William Adams, a technical analyst at TheBullionDesk.com in London, says if resistance at $914 is breached, the next stop for gold could be $975.

The exchange-traded funds that hold bars of gold were rallying also, with streetTracks Gold Shares ( GLD) and iShares Comex Gold Trust ( IAU) both rising about 1.1%.

In the precious metals patch, Barrick Gold ( ABX) and Newmont Mining ( NEM) were rallying around 3% each.

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