And the records are going to keep on coming.

With the U.S. dollar in a freefall and global gold demand rising, analysts say the precious metal will likely continue its bullish trend through at least the first half of 2010. It could rise as high as $2,000 an ounce, which would represent a 73% gain from current record levels.
 
"Everything is pointing to the price of gold going higher," Mike Sander, an investment adviser at Seattle-based Sander Capital Advisors, wrote in an e-mailed report.

And "a whopping budget deficit continuing to balloon, a Federal Reserve in no place of raising rates, and central banks all over the world diversifying away from the dollar," will be the main catalysts for gold's continued rise, he said.

Indeed, the U.S. Federal Reserve's loose monetary policy has put the dollar under duress. The central bank has pumped more than $2 trillion into the U.S. economy since the financial crisis began more than two years ago. It has lowered its benchmark Federal Funds rate to a record-low range of 0%-0.25% and it has stepped up purchases of U.S. Treasuries and mortgage-backed securities.

More recently, the return of investor risk appetite and the widespread belief that the Fed will have to keep its stimulus measures in place as the U.S. economy struggles out of a long and deep recession have put downward pressure on the greenback.

The dollar tumbled about 20% against the euro in the past year, and the Dollar Index – which measures the greenback against the euro and five other currencies – fell to a 15-month low of 74.679 on Monday and was retesting that low as of Wednesday.

With the dollar in freefall, central banks and hedge funds have sought shelter in hard assets, particularly gold. That's a big reason why gold has experienced such a remarkable run this year.

"You have to consider the amount of money sloshing around the world right now – China's $2.2 trillion in reserves, India's $285 billion in reserves, all of the money in central banks throughout the Middle East," said Martin Hutchinson, a contributing editor for Money Morning and a veteran banker with more than two decades experience in the international marketplace. "If all of the serious money charges into gold and gold really gets going, you'll see a tremendous spike in prices."

Concludes Hutchinson: "I believe the price of gold will hit $2,000 an ounce next year."

Such steep run-ups have happened before. From 1978 to 1980, for instance, gold soared from $185 an ounce to $850 an ounce, Hutchinson recalls. Interest rates were about 10% at that time.