The U.S. dollar continued to decline today, and has helped push gold prices up sharply in today's action.

The dollar has been very weak lately, and as more concern mounts of the dollar's strength more investors are rushing into the precious metal, which traded up as high as $1,069.70 today, and is currently up $1.70 an ounce to $1,059.20.

In a bizarre twist, central bankers actually want the price of gold to rise because it would be an indication that attempts to stave off deflation were working. Why do we have all of this upside down thinking?

In the past year, we've seen gold go up on fears of inflation, then it rose on fears of deflation. Analysts who follow gold say that it may be entering a structural bull market. Why is this? For one thing, gold has held firm mainly due to the problems in the banking industry.

The mythical lore of gold dates to the dawn of man. Whether for jewels, religion or currency, gold's place in history is quite secure.

In the modern day, gold has become more about safe havens for fear mongers ready to declare the end of the world.

These folks will have you believe that the U.S. dollar will be worthless due to inflationary pressures arising out of a printing-press monetary policy. And that the collapse of U.S.-style capitalism necessitates a return to the one thing that we can count on to hold value no matter the circumstances.

Hogwash! Why not just make granite or bricks the de facto currency of choice. Ridiculous, right? But seriously, tell me the difference.

Of course, gold means so much more to the lunatics that believe the precious metal will solve all of their problems. What a joke. The only real utility for gold is aesthetic. The stuff looks nice in the form of baubles and chains. Beyond that, there is little true value.

Gold is trading down $19 today, and pulling several major gold stocks down to new 52 week lows in reaction to the drop in the precious metal.

If you follow gold prices, you know that the past month has not been kind on the commodity, with prices falling from above $900 an ounce a few weeks ago down to its current price of $716.30. Earlier in today's session we actually saw prices trading much lower, breaking through the psychological $700 barrier, and falling all the way down to $695.20 an ounce. This is the first time in 13 months that gold has been under $700, and marks a huge drop from the highs it set back on March 14, when it was at historic highs above $1000 an ounce.

Typically, you would think that recessionary times in America would lead to a rise in gold, but this time around things are a bit different. Not only is America in hard times, but countries all around the world are dealing with their own economic slowdowns, which in turn is pushing currencies around the world lower. As this happens, the dollar, despite the current state of the American economy, has been strengthening against its foreign counterparts. As we all know, gold trades inversely proportionate to the dollar, so any strength in the American currency will result in gold prices dropping, and that is part of what we are seeing right now.

Minutes ago the Federal Reserve Board cut the overnight discount rate to 2.25%. At first, this did not meet with the expectations of Wall Street traders, or perhaps their imaginations. The Dow, which was up about 300 points during morning trading as reported earlier, moved a bit lower. However, it soon recovered and is moving up again.

Where we will end up is strictly guess work but this market is not one of conviction, so I expect the retreat to continue at least to a level such that the fearful will not want to be over-weighted overnight. Nobody wants to fall victim to news headlines and many will want to lock in whatever profits they can for the day.

Lower rates mean a lower dollar, and most likely more upward pressure on gold prices, which topped $1,010 an ounce today. I am not a gold expert but I would not be surprised to see the precious metal higher going forward, given the Fed's abandonment of inflation concerns -- at least for now.

UPDATE: Dow FINAL up 420.41 points to 12,392.66 (3.51%)

Sheldon Liber is the CEO of a small private investment company and the design and research principal for an architecture and planning firm. He writes Chasing Value and Serious Money columns.

It was only yesterday that I wrote about Freeport McMoRan Copper & Gold (NYSE: FCX), noting the favorable metrics and that I put it on my watch list. And this morning I find that Gold & platinum prices soared to new highs, with gold futures setting a new record of $952.40 an ounce.

It seems investors the world over are rediscovering the precious metal after years of neglect. How could you expect anything else with social unrest, war and recession fears on the front pages of every newspaper, with China and India growing rapidly, placing high demand on all commodities, and with a head-in-the-sand administration just now lifting itself up to take a gander at the last few months of its dubious leadership.

Despite recession fears, there is also the serious possibility of dramatic inflation in the next few years based on deficit spending, the ever expanding federal government and lack of concern for the value (buying power) of the currency. It's pitiful. Gold has been an historic hedge against inflation, so why should now be any different?This has ignited one of my 2008 picks Chasing Value: Anglo American (AAUK) is down...but!, which has moved up sharply in the last week.

I do not know where the ceiling is on gold prices, but it does not seem historically high, and I still think AAUK and FCX belong on everyone's watch list.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of AAUK.

In case you hadn't noticed yet, we are definitely in the midst of a modern day gold rush. Gold prices have been rising strongly again today, with February gold futures moving up as high as $871.20.

There are two main reasons why people are quickly moving into the precious metal. One is the fear a possible recession on the horizon. Any time you enter into a period of economic uncertainty gold becomes a favorable avenue for people's money. The more obvious and in your face explanation for the recent gold rush is the weak U.S. dollar. The weaker the dollar gets, the more favorable gold will be to investors.

Will gold continue to move higher? I think so. Right now America is facing a pretty discouraging mortgage situation. How bad things are going to get is anyone's guess, but you can be sure of one thing: the Fed will do anything it can to keep the economy in "good shape".