A tumbling US dollar, inflation fears and supply shortfalls have driven up gold price, which briefly pushed past the psychologically important 1,000-dollar mark for an troy ounce on Thursday, analysts said.
Gold price rose sharply last year with a 32-percent rally and was up 20 percent this year. Analysts have believed hitting the 1,000-dollar level was just "a matter of time".
The devaluation of the dollar is the main driving force for gold's price hike, analysts said. The plunging US currency made dollar-denominated assets like gold look cheaper and therefore helped drive buying by investors with stronger currencies.
"It's an investor-driven story, with the investor demand coming from US dollar weakness," said Daniel Hynes, metals strategist at Merrill Lynch. Hynes predicted the trend would not abate "anytime soon".
Growing fears about a shaky US economy and the Federal Reserve's interest rate-cutting campaign have plunged the greenback to record lows against other major currencies, especially the 15-nation euro.
The euro rose to a new high of 1.5625 dollars before falling back to 1.5587 dollars in late New York trading, still above the 1.5526 it bought late Wednesday. The dollar traded as low as 99.75 yen before recovering to 102.04 yen Thursday.
For now, market players still expect a further interest rate cut by the US Federal Reserve at its rate-setting session next week. A rate cut could add to the weakness of the dollar and drive up gold.
Secondly, worries about rising inflation have prompted investors to rush into gold to hedge against the risk.
