The price of gold is skyrocketing thanks to investors' desire for a haven amid recession fears and global instability, plus a weak dollar and rising prices of other commodities such as oil.
An ounce of gold for February delivery on the New York Mercantile Exchange jumped $6.50 to $900.10 in morning trading, a psychologically important milestone. The price of the precious metal later fell on profit-taking but still ended $4.10 higher at $897.70 an ounce, a record for a closing price.
Gold set a trading a record of $897.30 on Thursday.
"It's a reflection of market sentiment: Gold is a hedge against uncertainty, and right now it's the best bet," said Carlos Sanchez, a precious-metals analyst at CPM Group in New York. "None of the other investment options look that great, and gold does."
Still, when adjusted for inflation, gold remains well below its all-time high. An ounce of gold at $875 in 1980 would be worth $2,115 to $2,200 today.
Gold has had a meteoric rise in the past year -- rising nearly 32 percent in 2007 -- boosted by a falling dollar, rising prices for oil and other commodities, and increased Middle East instability. Those trends have increased the metal's appeal as a haven: Gold is seen as a safe investment in times of political and economic uncertainty around the world.
Also driving gold higher was Federal Reserve Chairman Ben Bernanke's pledge Thursday to cut interest rates to boost the economy, which some fear may be sliding toward recession amid turmoil in the housing and credit markets.
Lower interest rates tend to depress a country's currency and drive investors to shift funds to hard assets such as gold. A cheap dollar can make commodities more attractive as an alternative investment, and also can increase demand among foreign buyers as their currencies gain strength.
"Concerns of a recession will keep pushing up gold prices," Sanchez said. "Depending upon what happens in the economy and in the Middle East, we could see gold testing $1,000 an ounce, maybe even this quarter."
Hedge and pension funds, along with other long-term investors, also flocked to gold as the U.S. mortgage and credit crisis intensified.
"The funds are really heavily at play ... The momentum with gold is almost like mania. We keep wondering how high it will go," said Jon Nadler, an analyst with Kitco Bullion Dealers in Montreal.
Investors looking to get in on the gold rush can expect volatility for the rest of the year, said Nadler, whose firm forecasts a trading range of $750 to $950 an ounce.
The steep rise in precious metals also will mean that consumers in the United States -- the biggest buyer of gold after India -- can expect to pay higher prices for gold earrings, bracelets and other jewelry.
"People are going to feel that sticker shock when they go down 5th Avenue," Nadler said. "You'll start seeing the increase reflected as early as Valentine's Day."