Gold Finally Crosses $1000 Threshold

Gold is shining brighter than it ever has before; the precious metal hit its all-time high of $1000 per troy ounce Thursday and many speculate that this price is far from the ceiling for the metal.

The price of gold has been rising in recent months due to the weakening U.S. dollar, the slow-down in production in gold mines, and the increase in inflation. Gold hit a record price when gold for April delivery rose to $1001.00 in morning trading and then dropped slightly to $980.50 in mid-morning in New York. It rose 32% in 2007.

"I believe gold is going to go higher," said JPMorgan Chase analyst John Bridges. "[Now that we have gotten] above 1000, we are going to get a whole lot of momentum driven investors who are going to drive the price higher."

Gold is traditionally denominated in U.S. dollars, although the currency stopped being backed by gold in 1971. The ongoing weakening of the dollar against other currencies of the world, particularly the yen and euro in recent days has driven investors to flock to the metal as a means of protecting themselves.

This is similar to the spike in the price of the metal that occurred in late 1979 when it hit $850 per troy ounce as investors rushed to gold on fears of increased inflation. The price of gold fell back to depressed levels in the early 1980s as the Dow Jones industrial average passed the 1100 mark for the first time. Gold stayed at these depressed levels until the recent housing slump and credit crunch brought the dollar spiraling down against the world's other currencies. The U.S. currency fell to a more than 25 year low against the yen on Thursday when it fell below 100. (See: " Yen Strengthens, Briefly Dips Below 100 Per Dollar")

A number of other factors are driving up the price of gold, including slower production in gold mines, particularly in South Africa. The country experienced a severe blackout in mid-January, causing mines to close for a week and cutting production at Gold Fields (nyse: GFI - news - people )for the three-month period ending in March by 25%. The firm is Africa's second largest gold producer, accounting for 12% of global production in 2007. Also, utility company Eksom was forced to cut power supplies to 90%. Gold Fields said this decrease in power would reduce the capacity of the mines by 20% from the next quarter onward. (See: " Gold Fields Counts The Cost of Power Crisis")

Gold mines around the world are also aging, causing a lower-quality product to reach plants and slow production. "Mine supplies have been falling and central bankers have been less willing to sell gold from stock, and at the same time Asian demand for gold has been holding up," added JPMorgan's Bridges.

The ability to invest in precious metals via exchange-traded funds, set up over the past two years, has also boosted prices, providing a conduit for the investment community to put their money into gold. These include StreetTRACKS Gold Trust (nyse: GLD - news - people )which rose 1.4%, or $1.33, on Thursday, to $98.44 .That is up from $82.46 at the end of last year and $63.21 at the close of 2006.

Gold is not the only metal that has been shining more brightly of late. Silver hit its highest in more than 25 years when it hit $20 an ounce in early March before falling back to $19.94 and platinum rose to a high of $2128.50.

Gold and Silver Shine Brighter

Gold has reached new levels of glitz as the dollar continues to fade.

The precious metal is rapidly approaching $1000 per ounce and is likely to hit that new level sometime this year. Gold hit a record price when it rose $7.60 to $975.10 after having traded as high as $978.50 in New York. It has risen 16% in 2008 on the top of a 32% increase in 2007.

Gold is not the only metal that has been shining more brightly of late. Silver hit its highest point in more than 25 years when it hit $19.92 an ounce before falling to $19.74 and palladium was up to a new six-year high of $582 an ounce before falling to $560.00. Platinum rose to a high of $2,161. The price of precious metals is being driven up by a weakening dollar; the U.S. currency fell .6% on Friday to $73.82 on the dollar index which measures the buck against six other currencies, as well as rising costs of gold production due to aging mines and depletion of product.

"There are a couple of drivers that are pretty important for the gold price right now, especially the U.S. dollar, it's an inverse relationship that's pretty tried and tested," said Dundee Securities analyst Mark Smith. "As the price of gold goes up, producers are able to mine lower grade materials and since the plants are fixed in size that makes production on an annual basis decline slightly."

Gold is denominated in U.S. dollars and the weakening price has driven investors to flock to the metal as a means of protesting themselves.

StreetTRACKS Gold Trust (nyse: GLD - news - people ), an exchange-traded fund that tracks the price of bullion, rose 0.2%, or 19 cents, on Friday, to $96.18. That is up from $82.46 at the end of last year and $63.21 at the close of 2006. "Inflationary pressures are something that are also playing into the market. Fundamentals are strong and I think $1,000 would not be an end. We are going to go higher from there," said Lehman Brothers analyst Michael Widmer.

The U.S. Treasury announced Monday that it supports selling some of the gold reserves held by the International Monetary Fund. The proposed gold sales could bring as much as 400 tons of gold to market. The IMF holds the third-most gold reserves in the world, behind the U.S. Federal Reserve and Germany's Bundesbank.