Gold Hits Record High at $1,040.15 on Weak Dollar

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"We'll see further highs over the next 36 months."

Gold rose to set a record high at $1,040.15 an ounce in Europe on Tuesday, extending earlier gains, as technical momentum added to buying on the back of the weaker dollar.

Spot gold was bid at $1,038.95 an ounce against $1,016.65 late in New York on Monday.

"We'll see further highs over the next 36 months. I think people are prepared to be short of dollar and long of other currencies, including gold," said Michael Jansen, analyst at JP Morgan.

U.S. gold futures climbed to an all-time high on the back of a weakened dollar, surpassing the previous record set in March 2008.

Its high of $1,040 bested the previous record of $1,033.90 for COMEX gold on a second-month continuation basis.

The dollar fell after a media report, later denied, that Gulf Arab states were in talks to abandon the dollar in oil trade in favor of a currency basket.

A small seasonal increase in demand for physical gold is also supporting prices, traders said.

"The ability of gold to climb back over $1,000 is, in our opinion, impressive," HSBC analyst Jim Steel said in a note. "If the dollar remains subject to gradual erosion and commodity prices remain firm.... then gold is likely to remain well-bid and may challenge all-time highs."

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