Gold Extends Record: $1,043.30

Gold prices extended their record gains as speculative and investment buying continued for a second day, drawn to the metal mostly due to weakness in the dollar.

Nearby but lightly traded October gold settled $4.70 higher, or 0.5%, to a closing record of $1,043.30 a troy ounce on the Comex division of the New York Mercantile Exchange. It hit a spot-month record of $1,048.20.

Most-active December gold rose $4.70 to $1,044.40 and hit an intraday high of $1,049.70.

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Reuters

Gold is melted at a workshop in Beirut on Wednesday. The yellow metal is up 18% so far this year.

The rise appeared to be momentum-based, analysts said.

"The dollar is a little bit stronger," said Craig Ross, vice president of ApexFutures.com. "But you are seeing gold and silver hold their gains and a little bit up."

But while slightly higher Wednesday, the dollar still has an overall weak tone. The euro isn't far from the late-September highs against the greenback that were the European currency's strongest levels in a year. Investors often turn to gold as a hedge against dollar weakness.

The foreign-exchange market seems to be the main focus for gold, especially because the Treasury market has risen in recent months, meaning bond traders aren't factoring in foreseeable inflation for the U.S., said Frank Lesh, broker and futures analyst with FuturePath Trading.

"I think the gold trade is really about gold being an international currency," Mr. Lesh said. "And I think it's a big inverse trade against the dollar."

Two events that pressured the dollar Tuesday and sent gold soaring were an Australian interest-rate increase and a report in a U.K. newspaper, denied by several countries, suggesting that Persian Gulf states, China and some other nations were considering an alternative to the dollar for pricing oil.

"The more concern there is about the U.S. dollar, the more likely we are to see gold moving higher, not so much as an inflation play but a safe-haven play," said Dan Cook, senior market analyst with IG Markets.

Still, others said buying as an inflation hedge is offering at least some support for gold. Mr. Ross pointed out that even if U.S. inflation doesn't kick in for the foreseeable future, economic improvement in emerging-market nations could mean inflation there.

In other commodity markets:

CRUDE OIL: Prices fell as the latest weekly energy data from the U.S. failed to showcase any rebound in oil demand. Consumption usually sags in September, but for the four weeks ended Oct. 2, demand for core oil products was at its lowest since the government started recording the category in April 2004. Light, sweet crude oil for November delivery settled $1.31 lower, or 1.9%, at $69.57 a barrel on the Nymex.

NATURAL GAS: Prices finished slightly higher as traders weighed forecasts of colder weather in the major gas-consuming regions against profit-taking ahead of U.S. inventory data expected to show a record amount of gas in storage. Nymex November gas settled up 2.4 cents, or 0.5%, at $4.904 a million British thermal units.

By ALLEN SYKORA