Gold eyes record as dollar and inflation stars align

By Jan Harvey

LONDON (Reuters) - Gold could be pushing towards a record high after prices surged through $1,000 an ounce on Tuesday for only the third time in history as the dollar's broad-based deterioration continues to fuel buying of the metal.

With the precious metal benefiting from fears over rising inflation in the longer term as well as momentum buying and dollar weakness in the short term, prices are only a short hop from the March 2008 record of $1,030.80 an ounce.

"We had a good technical break higher last week and now the weaker dollar is helping gold progress higher," said Saxo Bank senior manager Ole Hansen.

"We are finally taking out some levels we haven't seen for a while, especially in the currencies," he said. "On that basis, I would assume we will go up to test the highs from last year."

TECHNICAL BREAK

Gold last week broke out of the tight range it had held over the seasonally slack summer months, as a break through key technical levels at $962 and $976 led shorts to cover and undecided investors to jump into the market.

After a few sessions' consolidation above $985 an ounce, the metal hit new year-highs of $1,007.45 an ounce on Tuesday, leading to speculation currency weakness could spark a move above the current record high.

"The implications for the breakout are strong both in the short and medium to long term, and are indicating that we could go to $1,050," said independent technical analyst Cliff Green.