Fear of inflation, a weakening US dollar, a sense that equities have overshot their mark, and a growing consensus that gold is an attractive asset class sent the commodity through the $1,000-an-ounce barrier yesterday.

Gold rang in at $1004.50 an ounce for the 11 a.m. London price fix and topped $1007 in morning trading on Tuesday. Before this month, the highest 2009 price came on 20 February when gold fixed at $989. It has since traded between $870 and $993, averaging $879. 

"We have seen record inflows into [ETFs] and significant increases in retail demand for bars and coins [this year] as investors around the world took steps to diversify risk in a systematic way and improve their portfolios' long-term prospects," said World Gold Council chief executive Aram Shishmanian. "The stability in the gold price over the long term is testament to the diversity of gold's demand base, which insulates the price from movements in any single category or country."

The World Gold Council, a New York-based association backed by a consortium big mining companies, says the leap in gold prices comes down to four main factors.

These include: Recognition of gold as an asset class. Retail and institutional investors are increasingly turning to gold as an independent asset class to ensure their portfolios are properly diversified and risk-mitigated.

Continued fears over inflation: Some economists are predicting rising inflation as a result of governmental measures to stimulate recession-hit economies. Gold is viewed as a hedge against inflation; though its real value can vary in the short term, its purchasing power has remained stable over centuries.

Weakening dollar: Gold is a statistically-proven hedge against fluctuations in the US dollar, the world`s main trading currency. The dollar, having traded at highs earlier in the year, has weakened against the euro and sterling in recent months.

Equity-market performance: Some doubt that the recent rise in equity markets is sustainable in the short term. This is encouraging investors to look to gold as a kind of portfolio stabilizer. This diverse demand base has helped support the price despite a pressure on jewelry demand driven by ongoing economic uncertainty and high local gold prices," says Mr Shishmanian.