Gold price passes $1,100, and still rising

CHICAGO --- The new gold rush is on.

The price of the precious metal hit a record $1,119 an ounce on Wednesday -- confounding market analysts who thought there was no way gold would remain so expensive when it first cracked the unheard-of $1,000 mark last year.

The remarkable run has implications far beyond savvy investors. In New York's diamond district, more people started showing up late last year to sell their gold, and the crush hasn't let up, said Anthony Iannelli, owner of Iannelli Diamonds.

"They're bringing in jewelry from the '70s and '80s they don't wear anymore," he said. "They're following the news and see prices are high. They realize they have a little cache, and want to take it out of the vault."

Typically, gold is a safe place for investors to park their money, not something they buy to make money. For example, when gold first reached $1,000 it was in March 2008, shortly after the collapse of investment bank Bear Stearns. Investors bought it up then because they feared for the stability of the financial system.

This time is different. Investors are buying gold to protect themselves against the falling dollar.

Currencies are weak investments around the world because of record-low interest rates. Foreign banks that hold substantial amounts of U.S. debt, such as China's, want to diversify their holdings.

News earlier this month that India's central bank bought nearly $7 billion worth of gold from the International Monetary Fund triggered a frenzy of gold buying.

The surge has been remarkable. Gold is up 7 percent just this month, and 26 percent for the year. Some forecasters see it going to $1,200, $1,500 or beyond. Some analysts are panning the gold speculation.

"You just don't see increases like this over the short term" that last, says Steve Condon, the director of investor advisory services for Truepoint Capital in Cincinnati.