Gold nears $1,100, extends gains as dollar weakens

Gold prices rallied to another new high Wednesday on the back of a weaker dollar.

Gold for December delivery rose to as high as $1,098.50 an ounce, before settling up $2.40 at $1,087.30 an ounce on the New York Mercantile Exchange, adding to big gains the day before.

News that India's central bank bought nearly $7 billion worth of gold from the International Monetary Fund triggered a frenzy of buying on Tuesday that carried over to Wednesday as the dollar weakened.

Gold is seen as a hedge against a falling dollar and inflation.

Demand for gold has risen steadily over the past few months as record-low interest rates pressure the dollar and drive investors to look for higher returns in other assets.

On Wednesday, the Federal Reserve kept its benchmark interest rate at a record low of near zero, signaling that it is not yet concerned about inflation. But the low rates will likely weigh on the dollar further and should support higher commodity prices in the near term. A weaker dollar makes dollar-denominated commodities more attractive for foreign buyers.

"There's a sense among investors that this bull market may have a considerable way to run," said George Milling-Stanley of the World Gold Council.

Other metals also rose. December silver jumped 22.5 cents to $17.405 an ounce, while December platinum rose $13.10 to $1,366.10 an ounce.

December copper futures rose 3.7 cents to $2.993 a pound.

Oil prices moved higher after the Energy Information Administration said oil and gasoline supplies unexpectedly dropped last week. But the drop is due more to declines in production than an increase in demand - a bad sign for the economy.

Oil prices also got support from the weaker dollar, a big driver of higher energy prices this year. Light, sweet crude for December delivery rose 80 cents to $80.40 a barrel.

In other Nymex trading, gasoline futures added 1.23 cents to $2.0127 a gallon, while heating oil futures gained 1.69 cents to $2.0902 a gallon.

On the Chicago Board of Trade, December wheat futures rose 5.25 cents to $5.21 a bushel, while corn for December delivery slipped 6 cents to $3.84 a bushel.

January soybeans fell 11.5 cents to $9.99 a bushel.