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Analysts: Gold's Record Highs Tied To Dollar's Low

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Analysts: Gold's Record Highs Tied To Dollar's Low

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Analysts: Gold's Record Highs Tied To Dollar's Low

Analysts: Gold's Record Highs Tied To Dollar's Low

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The price of gold hit an all-time high Wednesday for the second straight day. The dollar's decline has been one of the main factors behind gold's rise. Analysts say many investors are buying gold as a hedge against the possibility of further declines in the dollar.

STEVE INSKEEP, host:

The price of gold hit an all time high for the second day in a row. Today the metal traded at $,1048 an ounce. One thing pushing gold so high is uncertainty about the dollar and its future role in the global economy.

NPR's John Ydstie reports.

JOHN YDSTIE: While gold set a new record in dollar terms, the peak was not a record in other major currencies. Gold has risen in dollar terms recently because the U.S. currency's value has steadily fallen as the financial crisis has abated.

Back during the depths of the crisis, the dollar strengthened as investors around the world rushed to the safety of U.S. government securities. But now investors are focusing on the dollar's shortcomings. Many fear that massive U.S. government spending to fight the recession will ultimately spark inflation and erode the dollar's value.

Also, talk of replacing the dollar as the world's reserve currency has investors worried. Those worries were inflamed by a report yesterday in the British newspaper The Independent, which said oil producers were in secret meetings to end the practice of pricing oil in dollars. The story was immediately denied by top officials from big oil producers, Saudi Arabia, and Russia.

While some analysts predict gold may rocket to more than $2,000 an ounce, others are nervous about its current lofty levels. They note that demand for gold jewelry is down about 15 percent because of economic weakness worldwide. But the desire of fund managers to hold some gold in their portfolios as a hedge against inflation could keep its price high.

John Ydstie, NPR News, Washington.

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