Gold soared to a 7 1/2-year high in New York on Wednesday, fueled by a weaker dollar, a terrorist attack in Iraq and by more speculators hopping aboard the metal's latest rally.
Gains in gold, silver, wheat and corn helped push a key index of commodity prices to its highest level in at least six years.
Near-term gold futures jumped $6.80 to $394.90 an ounce, highest since spring 1996.
The metal has been rallying in fits and starts since early in 2001, when the price was about $255 an ounce. Gold had become increasingly out of favor during the 1990s, but more investors began turning to it during the bear market for stocks and after the Sept. 11, 2001, terrorist attacks.
This year, the weaker dollar has benefited gold. Because gold is priced in dollars, a sliding buck means gold becomes cheaper for foreign investors whose currencies are rising. What's more, some U.S. investors have been looking to gold to offset the dollar's declining purchasing power.
"Gold has been the beneficiary as a counter-currency to the dollar," Mark Keller, chief investment officer at A.G. Edwards Asset Management in St. Louis, told Bloomberg News.
"It's the last currency that you can't debase," said Ian MacDonald, head of bullion trading at Commerzbank.
On Wednesday the euro rose to $1.163 from $1.151 on Tuesday after a report showed that French industrial production in September increased for the third time in four months. The euro was at $1.05 on Jan. 1.
Gold's reputation as a haven in times of geopolitical instability was boosted Wednesday after a bombing at an Italian military police base in Iraq killed at least two dozen people, deepening concerns about Iraq's future.
Analysts also said some speculators were jumping aboard the gold bandwagon, seeking to push it above $400 in the hope that more publicity would further stoke the price.
Measured by near-term futures prices, gold bullion is up $46.70 an ounce, or 13.4%, since Dec. 31. The stock market has fared better than that: The Standard & Poor's 500 index is up 20.3% in the same period. But since Sept. 15 gold is up 5.4% while the S&P; 500 is up 4.3%.
Gold-mining stocks have been much bigger winners this year than bullion. Placer Dome Inc. jumped $1.06 to $16.79 on Wednesday and is up 46% this year. Newmont Mining Corp. surged $1.70 to $43.96 on Wednesday; it's up 51% this year.
Gold has been part of a broader bull market in commodities since 2001. The CRB/Reuters index of 17 commodity futures contracts rose 0.6% to 253.13 on Wednesday, highest since 1997. Near-term silver futures surged 26.8 cents, or 5.3%, to $5.33 an ounce. Wheat and corn futures rose on expectations of higher U.S. export sales.