Gold's popularity as an alternative to the slumping US dollar saw the precious yellow metal surge to a fresh all-time high of $1036 on Tuesday afternoon.

Gold first broke through its 18-month high of $1024 an ounce touched in September and then surged through its previous record high of $1032.70 reached in March 2008 and was last at $1036.55 an ounce, $19.63 from $1016.62 at JSE's last close.

Analysts said the weak dollar continued to be the greatest driver and concerns over the devaluation of world's most revered currency has sent investors rushing into the arms of waiting gold traders.

The dollar declined to a one-year low on Tuesday after newspaper reports that that Gulf nations were considering a profound financial change in the currency in which they trade oil — a move that means oil will no longer be priced in dollars.

Later denied, the exclusive report published in the UK by The Independent stated Gulf Arab states — along with China, Russia, Japan and France — were considering replacing the greenback with a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Cooperation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

"News on gold's expected future role in oil transactions between these trading partners has sent the price past $1020," said Peter Spina, chief investment analyst at GoldSeek.com.

Spina was quoted by MarketWatch as saying that trading gold and other currencies in exchange for oil would "establish gold as a recognised medium of exchange, returning it a step closer to its role as money on a world trade system."

HSBC analyst James Steel was quoted by Dow Jones Newswire as saying a constant feature of the gold rally had been persistent dollar weakness, accompanied by occasional questioning of the dollar's status as the world's reserve currency.

Mitsubishi analyst Tom Kendall said it was also ongoing concerns about the US deficit, the longer-term potential for inflation and overall higher commodities that were leading gold prices higher.

At 3.09pm the rand was bid at 7.4037 to the dollar from 7.4590 at its previous close while the euro was bid at $1.4736 from $1.4648 overnight.

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