SAN FRANCISCO (MarketWatch) — Gold futures climbed more than $23 an ounce Wednesday to close at a record level as European debt contagion fears and the U.S. Federal Reserve’s hints at further economic stimulus fed investment demand.

“Inflation and deflation have now been slugging it out for over a decade, and physical gold remains an obvious, sensible refuge for private savings caught in the middle,” said Adrian Ash, head of research at BullionVault.com, an online service for gold-bullion trading and ownership.

“A European debt-default, plus QE3 in the States, would make the perfect storm yet again,” he said, referring to the potential for a third U.S. round of quantitative easing.

Gold for August delivery GC1Q added $23.20, or 1.5%, to $1,585.50 an ounce on the Comex division of the New York Mercantile Exchange.

Prices, which marked their highest nominal settlement price, have now tallied a gain of almost $103 during a winning streak that, so far, has spanned seven sessions.

The Fed is examining several untested means to stimulate growth if conditions deteriorate, including another round of asset purchases, dubbed QE3, Fed Chairman Ben Bernanke said Wednesday in remarks prepared for the House Financial Services Committee. Read more of Bernanke’s remarks.

Bernanke’s comments “hint at inevitable emergency techniques in the face of various treasury-auction situations and credit-rating events,” said Richard Hastings, a macro strategist at Global Hunter Securities. So, “the tone is growing darker and gold, of course, is lighting up against this ominous background.”

Pain looms for the middle class

The gains among the metals were strongest for silver Wednesday, with the September contract SI1U adding $2.52, or 7.1%, to finish at $38.15 an ounce.

Futures prices haven‘t closed above $38 since May 31 and analysts said silver is likely playing catch up with gold’s strength.

Brien Lundin, editor of Gold Newsletter, said Bernanke’s statement, in response to questioning from Congressman Ron Paul, that gold is not money “reveals either intellectual ignorance or arrogance — or both.”

“The rise in gold since [Bernanke] has taken office is a direct result of his accommodative monetary policies, and to confirm or pretend ignorance of this fact shows investors that he’s really not concerned with how high gold may go in reaction to his policies,” Lundin said.

Europe’s woes

Precious metals have benefitted from safe-haven buying on mounting concern that Europe’s sovereign-debt crisis will spread beyond Greece.

Late Tuesday, Moody’s Investors Service downgraded Ireland’s debt to speculative, or junk, status, sparking a selloff in U.S. stocks. Read more about Ireland.

And on Wednesday, Fitch Ratings further downgraded Greece’s long-term foreign and local currency issuer default ratings. Read more about Fitch’s Greek downgrade.

European-debt concerns “are certainly driving gold back up to test its old record highs,” said David Combe from Commodity Broking Services in Sydney, but a rise in the U.S. dollar would cap further gains.

On Wednesday, a weaker greenback encouraged investment in dollar-priced commodities including metals.

The U.S. dollar index DXY, -0.07% , which measures the U.S. unit’s performance against a basket of six other major currencies, dropped to 75.225 from 75.589 ahead of Bernanke’s speech. It was at 76.028 late Tuesday in North American trading. Read about Wednesday’s currencies action.

Big silver move

Silver prices, meantime, remain more than 20% off record highs.

“Silver’s long-term price ratio between gold and silver is a lot wider than it normally is, and we should see silver want to catch up with gold, or gold come down to a more normal ratio level,” Commodity Broking Services’s Combe said.

Metals investors were also weighing up the latest print on the Chinese economy Wednesday. China expanded a fraction faster than expected in the April-to-June quarter, while other data released Wednesday suggested domestic conditions remain relatively upbeat. Read more about China’s GDP.

“There’s a little bit of cooling in China, but no cause at this stage to think there is any sort of demand that is going come off. [Gross domestic product] numbers are still pretty respectable,” Combe said.

The broader metals complex finished higher Wednesday along with gold and silver.

Platinum for October delivery PL1V rose $30.70, or 1.8%, to end at $1,767 an ounce, while the September contract for palladium PA1U, platinum’s sister metal, gained $16.55, or 2.2%, to close at $784 an ounce.

September copper HG1U added a penny, or 0.3%, to finish at $4.404 a pound.