Gold powers to record high

NEW YORK/LONDON (Reuters) - Gold set record highs for a second straight session on Wednesday as investors bought the precious metal due to fears the dollar may weaken further, bringing inflation.

Bullion has gained nearly 20 percent this year, helped by dollar weakness and inflation worries after central banks and governments across the globe poured billions of dollars into the financial system to revive growth.

Spot gold hit a historic $1,048.20 an ounce, and was last at $1,041.75 an ounce by 1:17 p.m. EDT, versus $1,040.85 quoted late in New York on Tuesday.

At the COMEX division of the New York Mercantile Exchange, gold for December delivery closed up $4.70 to $1,044.40 an ounce, after dealing in a session range between $1,037.80 to $1,049.70, a new all-time record high.

Other precious metals also rose, with palladium hitting $313.50 an ounce, its highest level since August 2008. Platinum rose to a two-week high and silver to a three-week high.

The dollar swung into positive territory, clipping gold's gains along with technical resistance at $1,050 per ounce. Still, analysts said momentum should remain in the market's favor.

"When the market moves this much in the space of two days, you have to expect it to pause for breath. But we don't see too many signs of people looking to bail out and take profits here," said Tom Kendall, metals analyst at Mitsubishi Corp in London.

Daniel Sacks, Co-Portfolio Manager of the Investec Global Gold Fund, said gold prices were set to test new highs as the fourth quarter progresses.

"We believe it should continue to perform well against most assets into the final quarter of 2009. Moreover, the price of gold is still just over half of its prior peak in "real" terms, even after the rally of the past eight years," he said in a note to clients.

Metals consultancy GFMS has put the inflation-adjusted peak for gold as high as $2,079 an ounce.