Gold powered through the $1,000 per ounce psychological barrier on Tuesday, carried by a wave of pent-up technical momentum and dollar weakness, with some analysts eyeing last year's record high at $1,030.80.
Some investors were also seeing gold as a warning to stock market bulls and were fretting about the result of central banks and governments pumping billions of dollars into banking systems to boost growth.
Spot gold rose to $1,007.45 an ounce, its highest since March 2008, when bullion touched a record high at $1,030.80. It was trading at $1,004.65 an ounce by 1112 GMT (7:12 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 $1,006.80 an ounce, versus Friday's close at $996.70 an ounce before the U.S. long weekend.
After last week's close above $990 an ounce, the market was basically waiting for an opportunity to get through that $1,000 level -- now we're looking for the U.S. open to see whether they're going to push this forward, said Tom Kendall, precious metals analyst at Mitsubishi in London.
The latest rally has become a self fulfilling prophecy, fueled mostly by technical buying from speculators who were afraid to miss 'the next price push in gold', said Andrey Kryuchenkov, analyst at VTB Capital in a research note.
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 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.
Implied volatility is a measure of demand for options, which investors use to take advantage of, or protect themselves against, sharp movements in spot rates.
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.
Gold is celebrating because the day when inflation might return is getting sooner rather than later, Ashok Shah, chief investment officer at London and Capital.
As long as the authorities are intent on not reversing their policies then gold will remain in demand and it will be wanted.
Investment flows took a break, with holdings in the world's largest gold-backed exchange-traded fund, the SPDR Gold Trust, standing at 1,077.63 tonnes as of September 7, unchanged from Friday, denting the price prospects for gold.
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 $16.68 an ounce versus $16.29 an ounce. Palladium touched $295 an ounce, its highest since September last year. It was last at $294.00 an ounce versus Monday's $291.50.
Platinum was at $1,278.50 an ounce versus $1,255.00 an ounce on Monday.
(Additional reporting by Chikako Mogi in Tokyo; editing by Anthony Barker)