NEW YORK (MarketWatch) -- Gold futures surged nearly 1% Wednesday, reversing early losses, as the metal's appeal as an inflation hedge and a safe haven continued to draw investment demand.

Gold for April delivery gained $8.30 to $937.80 an ounce on the New York Mercantile Exchange.

"Gold is now extremely well-placed to set a fresh record high as investors continue to seek the metal's anti-inflationary and safe-haven attributes," said James Moore, an analyst at TheBullionDesk.com, in a note.

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Gold futures rose, even as the dollar strengthened against other major currencies.

The dollar gained after both core and headline inflation figures were higher than expected in January, raising concerns the U.S. Federal Reserve might have to stay its easing hand and put inflation fears on the front burner again. See Currencies.

The Labor Department reported that inflation for January was stoked by large increases in energy and food prices but also showed increases in a host of underlying core prices. U.S. consumer prices rose a seasonally adjusted 0.4% last month. See Economic Report.
On Tuesday, gold futures soared $23.70 an ounce, or nearly 3%, as other metals also posted strong gains.

"The fact that commodities were all up across the board yesterday despite an uninspiring macro backdrop also suggests that fund and investment money is finding its way into the commodity space on perceptions that these investments will do better over the course of the year," said Edward Meir, an analyst at MF Global, in a research note.

Commodities are seen as an asset class where underlying demand is growing and where investments are entered into through contracts that are liquid and where price-discovery is transparent, Meir said.

"This stands in stark contrast to the almost toxic swatches of alterative investments we see elsewhere, such as non-government debt, CDOs [collateralized debt obligations], and mortgage paper, all of which in varying degrees, are suffering from poor liquidity, price opacity, and anemic investor demand," he said.

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