The price of Gold crept back above $1000 an ounce Wednesday morning in London, heading for its best-ever monthly average as the US Dollar lost 3.5% of its forex value from the end of August.

Asian shares closed the day higher, but Tokyo's Nikkei's ended September 2.5% down on the month.

European stock markets gave back early gains despite news of a drop in German unemployment and an IMF report claiming that "Risks to the global financial system have subsided as a result of unprecedented policy actions and a nascent global economic recovery."

Government bonds also ticked lower. Crude oil jumped towards $68 per barrel.

"[Next month's] corporate earnings are likely to show the banks' financial conditions are far from good enough to fix investor confidence," reckons Koichiro Kamei at the Market Strategy Institute in Tokyo, speaking this morning to Reuters.

"That means the Federal Reserve's easy policy is unlikely to end any time soon, resulting in a weak Dollar, inflation woes and – therefore – a buy for Gold."

After achieving two three-day runs above $1000 an ounce in September, the London Gold Fix was set this morning at $1001.25.

That took gold's monthly average to a new all-time record above $996 per ounce, some 2.9% higher than the previous monthly high of March 2008.

On a three-month basis, Gold was set to end the third quarter of 2009 almost 8% better against the Dollar, rising for the fourth quarter running and putting in its strongest performance since Jan-March '08.

"Currencies continue to drive the gold and silver markets," says one London dealer in a note.

"The Dollar is a key driving force for gold," agrees a Korean futures trader, speaking to Bloomberg.

Yet for both UK and Eurozone investors, the Gold Price averaged its best price this month since the record peak of Feb-March, adding 2.8% and 6.3% respectively against Euros and Sterling from August.

September's new Dollar record saw gold's average price rise 5.0% on the month.

"The fundamentals, particularly reduced crisis-driven investment demand, do not suggest the Gold Price will sustain the push through $1,000," cautions the latest quarterly outlook from Australia's Resource Capital Research.

In June, CRC forecast a six-month range for gold of $900 to $1000.

"We [now] see more risk on the downside towards $900 an ounce if equity markets continue to rally. Inflation is not yet real enough to be a sustained driver of gold.

"That is expected in second-half 2010."

Contrasting current Gold Coin and small-bar demand with the "safe haven" buying of late 2008 and early '09, the latest Refining Monitor from Mitsui's London office reports depressed levels of sentiment amongst the fabricators it surveyed in August.

The lack of strong physical gold-buying was matched, however, by much smaller inflows of scrap metal – primarily from consumers selling old, broken and unwanted jewelry – than at the previous $1,000 price-level in Feb.

"The price of gold jewelry has risen beyond the reach of the common people," says one Bangladeshi housewife seeking a wedding gift for her daughter, quoted today by The Daily Star.

"Except for weddings, people – and especially the middle class – do not Buy Gold jewelry."

Across the border in India – where the Nifty stock index today rose 1.5% to close at a 52-week high – gold imports fell for the fifth month running in September, according to the Bombay Bullion Association.

"Overall imports will be less than last year as prices are still too high," reckons BBA vice-president Harmesh Arora, speaking to Bloomberg.

Totaling some 50 tonnes this month – down four tonnes from Sept. last year – gold imports to India, formerly the world's No.1 private buyer of physical metal, may drop by three-quarters in full-year 2009 compared with the 759-tonne peak 2007.

For developed-world investors, in contrast, "Western governments are carrying out an unparalleled experiment with their public finances," says William Brockhurst, manager of the private-client Cheviot Balanced Fund in London.

"Gold remains the ultimate store of value and the only truly safe currency out there [and] now looks like an opportune time to buy," he writes for CityWire.

"The Chinese authorities recently started running adverts extolling the advantages of owning gold. China’s biggest bank, the ICBC, has set up a division to cater to increasing demand."

Analysis by BullionVault shows that, over the last 10 years, the proportion of annual savings put into gold by Chinese households has almost doubled to 1.8%, even as those savings have swelled by 260%.

"If Gold Investment is set to become the next craze for 1.3 billion Chinese people," says Brockhurst, "we'd like some in our portfolios first."

Looking to Buy Gold today? Make it simple, secure and cost-effective at BullionVault...