The price of gold surged to a fresh high Wednesday as the dollar fell to a 15-month low.
Gold futures for December delivery jumped to as high as $1,119.10 an ounce on the New York Mercantile Exchange in morning trading, then slipped back to settle at $1,114.60, up $12.10 from Tuesday's close.
Commodities including gold have been rising as the dollar has dropped. Gold's latest advance came as the dollar fell after Federal Reserve officials reiterated that the central bank will keep interest rates low for an extended period to support the economic recovery.
Low rates tend to weaken currencies including the dollar, encouraging investors to put their money in higher-yielding assets like gold. Investors also use gold as a hedge, not only against the falling dollar but also against inflation, which economists don't see as a threat right now.
The market, however, feels otherwise.
"There is this idea that inflation is inevitable," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research.
Gold prices are up 26 percent year-to-date. That compares with a mere 5.5 percent increase in the gold price in 2008.
Remarks by Treasury Secretary Timothy Geithner that the government supports a strong greenback did little to quell investors' concerns about a continued slide in the dollar. The ICE Futures US dollar index, a widely used gauge of the dollar against other major currencies, slid 0.2 percent after earlier hitting its lowest point since August 2008.