By Polya Lesova & Kate Gibson, MarketWatch
NEW YORK (MarketWatch) -- Gold futures rose on Wednesday, hitting an 18-month high earlier in the session, as a weakening dollar and expectations of a rebound in the global economy heightened demand for the precious metal as an alternative investment.
"Gold has found its footing in the low $1,000-an-ounce and looks set to launch an assault on the all-time record nominal high," analysts at GoldCore wrote in an email.
The record intraday price for a front-month gold contract is $1,033.90 an ounce set on March 17, 2008.
Gold for December delivery, the most actively traded contract, finished at $1,020.20 an ounce, up $13.90, or 1.4%, on the day. It earlier reached an intraday high of $1,023.30, its highest level since March 2008.
The front-month September contract finished at $1,018.90 an ounce, up $13.90, or 1.3%.
The dollar, which has served as a safe-haven asset over the past year because of its low yield, fell back to its lows of the year on Wednesday, after more upbeat U.S. economic reports.
On Tuesday, Federal Reserve Chairman Ben Bernanke said the U.S. recession is "likely" over. But he cautioned the economy will remains on a weak footing and the central bank is widely expected to continue providing ample liquidity well into next year.
The dollar index /quotes/comstock/11j!i:dxy0 (DXY 76.30, +0.06, +0.08%) , which measures the U.S. unit against a basket of six major currencies, fell to a fresh one-year low of 76.15 earlier. It recently stood at 76.223.
In other metals dealings, silver for December delivery gained 43 cents to end at $17.43 an ounce. October platinum rose 2.2% to finish at $1,350.10 an ounce, while December palladium added 1.4% to $295.35 an ounce.
Copper for December delivery rose 9.5 cents, or 3.3%, to $2.934 a pound.
"The catalyst for the rally was the weak dollar," wrote analysts at Commerzbank in a note to clients. Read Currencies.
The proximity of the all-time high "is increasingly attracting investors to the gold market, reflected in the sharp rise of speculative net-long positions and the recent inflows into the gold ETFs," they said.
On Wall Street, U.S. stocks gained, led by the energy and financial sectors, after a slew of economic data, including a 0.8% rise in industrial production in August. Read Economic Report.
Separately, the government reported U.S. consumer prices increased 0.4% in August, pushed up by a 9.1% increase in gasoline prices. Core consumer prices, which exclude food and energy, rose 0.1% last month. See detailed story.
With gold's rise and the slightly higher-than-expected headline reading in the consumer price index released Wednesday morning the implied inflation rate in the five-year Treasury Inflation-Protected Securities, or TIPS, rose six basis points to 1.55%, the highest level in three months, Peter Boockvar, equity strategist, Miller Tabak, wrote in a note.
"One year ago pre-Lehman, the five-year implied rate was also around 1.55%. Going a bit further back for more perspective before the world changed, five-year expectations got as high as 2.73% in early July '08 so there is thus room for higher implied inflation rates if the move higher in gold is correcting discounting pricing instability in the future," Boockvar said.