Gold futures continue to surge, up more than 1%

Metal earlier touches new record high of $967.70 an ounce
4:24 p.m. EST Feb. 27, 2008

Gold for April delivery rose $12.10, or 1.3%, to end at $961.0 an ounce on the New York Mercantile Exchange. Earlier, the contract hit a record $967.70 an ounce.

"We're definitely seeing the rally spurred by dollar weakness and a continued strong bid into all things commodity," said Zachary Oxman, senior trader at Wisdom Financial.

"Funds and speculators alike seem to be scrambling to get long commodities, gold especially," Oxman said.

Weakness in the U.S. dollar boosted gold's investment appeal. Gold, like many commodities, is denominated in dollars, and a lower U.S. currency makes it more affordable in other currencies.

The dollar was battered across the board, falling to a new record low of $1.5133 against the euro after downbeat durable-goods data and hints from U.S. Federal Reserve Chairman Ben Bernanke that more interest rate cuts are on the way. See Currencies.

The Commerce Department said new orders for durable goods fell 5.3% in January after a burst of orders in December, another sign that the economy is slowing. Economists surveyed by MarketWatch had anticipated a 5.1% drop. See Economic. Report.

After the data, Bernanke told Congress Wednesday that the central bank will remain on the course for additional rate cuts at least in the near term, and that downside risks to growth remain the key focus of monetary policy. See The Fed.

"Today's record lows in the U.S. dollar, record highs in gold and record highs on oil mark a key tipping point in currency markets, as traders further downgrade the U.S. currency to a low-yielding asset," said Ashraf Laidi, chief foreign-exchange strategist at CMC Markets US, in a note.

"The greenback is being damaged across the board on the notion that the ultra-low interest rates at the expense of escalating inflation is the only way forward to prevent further spreading of the U.S. recession," Laidi said.

On Tuesday, gold futures gained $8.40. Gold futures fell Monday after a senior Treasury official said the U.S. supports the proposed sale of part of the gold reserves held by the IMF.