Capital Gold Group Report: GOLD TOUCHES NEW RECORD HIGH OF $967.70 AN OUNCE

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. 

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. 

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. 

"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.

"Despite the increased likelihood of [International Monetary Fund] sales, it seems investors are more concerned with the threat that inflation/recession poses, and with two of gold's key driving forces -- euro/dollar and oil -- now in uncharted territory themselves, it seems inevitable that gold will challenge new highs closer to $1,000 an ounce," said James Moore, an analyst at TheBullionDesk.com, in a research note.

Crude-oil futures fell more than $1 to end below $100 a barrel, after hitting a record high above $102 overnight, as government data showed a bigger-than-expected buildup in U.S. crude inventories.

In a stagflationary environment, "commodities do quite well, since participants turn to hard assets to protect themselves against eroding purchasing power," said Edward Meir, an analyst at MF Global, in a research note. "However, history also shows that even commodities eventually suffer when the picture turns from slow growth to negative growth."

"Until we get there, however, it seems to be 'all systems go' for a variety of commodities, from wheat to copper to oil and to gold," Meir said.

Also on Nymex, March silver rose 49 cents to end at $19.21 an ounce, while April platinum edged down $3.60 to $2,152.30 an ounce.

March palladium gained $19.20 to end at $555.55 an ounce and March copper rose 6 cents to $3.84 a pound.

Gold warehouse inventories declined by 129,965 troy ounces to stand at 7.1 million troy ounces as of late Tuesday, according to Nymex data. Silver stockpiles rose by 598,984 troy ounces to stand at 134.8 million troy ounces, while copper supplies fell by 338 short tons to stand at 13,551 short tons.

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