Some investors were also seeing gold as a caveat to stock market bullishness as they fret about the result of central banks and governments pumping billions of dollars into banking systems to boost growth.
Spot gold rose as high as $1,007.45 an ounce, its highest since March 2008, when bullion touched a record high at $1,030.80 an ounce. It was trading at $1,003.20 an ounce by 5:13 a.m. EDT versus $993.85 an ounce late in New York on Monday.
U.S. gold futures for December delivery rose to $1,009.4 an ounce, before easing to $1,005.4 an ounce versus Friday's $996.70 an ounce.
The dollar is weaker, but I would put this move mainly behind technical momentum. Everyone has been expecting this massive move from a technical perspective, said Walter de Wet, an analyst at Standard Bank.
But the sustainability of the precious metal's rally above $1,000 an ounce, which also helped boost palladium and silver to 2009 highs, was in question.
UBS analyst John Reade said in a note to clients that gold options had moved sharply after breaking through $1,000.
Today's move in implied volatility suggests that the gold market is running short gamma at the moment and it is possible that a scramble for upside gold options could lead the spot gold price higher, he said.
We are unconvinced that all the ingredients are in place for a sustained surge higher in gold, he added.
Spot gold has now made three attempts to rise and stay above $1,000, including Tuesday's push. The market stayed above the key level for one day in February this year and three days in March 2008, when the record $1,030.80 was hit.
Despite gold hitting $1,000, it is far from an inflation-adjusted record, which analysts at GFMS have put as high as $2,079 per ounce.
Some analysts have said the higher gold price reflects uncertainty across markets about how central banks will untangle themselves from fiscal stimulus aimed at reviving economic growth, as well as dollar weakness.
We certainly also expect the dollar to weaken much more, said Standard's De Wet. The dollar fell to its lowest in almost a year against its trade-weighted basket.
Investment flows took a break, with the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, saying holdings stood at 1,077.63 tonnes as of September 7, unchanged from Friday.
My view is that by the end of the year the gold price will be lower, probably down to around $950 an ounce, said David Moore, a commodities strategist at Commonwealth Bank of Australia.
In other metals, silver hit a 13-month high of $16.81 an ounce and was at $16.75 an ounce versus $16.29 an ounce. Palladium touched $295 an ounce, its highest since September last year. It was last at $294.50 an ounce versus Monday's $291.50.
Platinum was at $1,270.50 an ounce versus $1,255 an ounce.
(Additional reporting by Chikako Mogi in Tokyo; editing by Sue Thomas)