More good new from the Goldmarkets and the effects for SBS.NEW...

More good new from the Goldmarkets and the effects for SBS.

NEW YORK (Dow Jones)-Gold futures extended their two-month highs Wednesday as the U.S. dollar fell sharply and participants were pricing in longer term inflation expectations, but the metal pared some of those gains as the dollar came off lows.

Febrary gold rose $25.80, or more than 3%, to settle at $868.50 an ounce on the Comex division of the New York Mercantile Exchange. The contract hit an intraday high of $883.60, its strongest price since Oct. 10.

With very low interest rates, gold is seeing buying on expectations of inflation or "severe currency issues" in the second half of next year.

The dollar's just getting crushed," said Pat Donnelly, senior broker with Peak Trading Group.

Shortly after gold closed, the ICE Futures U.S. dollar index was down more than 2%.

Gold, as a dollar-denominated asset, is seen as a hedge against a weakening U.S. currency.