TOKYO (MarketWatch) -- Growing speculation over the potential end to dollar-based trading in the oil market may be part of the reason gold prices have rallied beyond $1,020 an ounce to stand near their highest level in 18 months.

And the strength was kept even as several top officials, including Saudi central bank chief Muhammad al-Jasser, denied the report.

Gulf Arab states, along with China, Russia, Japan and France, are planning to put an end to dollar-based trading in the oil market, according to an exclusive report published Tuesday in the U.K. by The Independent.

"News on gold's expected future role in oil transactions between these trading partners has sent the price past $1,020," said Peter Spina, chief investment analyst at GoldSeek.com.

“ 'News on gold's expected future role in oil transactions between these trading partners has sent the price past $1,020.' ” — Peter Spina, GoldSeek.com

In place of the greenback, the nations plan to use 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 Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar, the report said.

The Independent said the plans were confirmed by both Gulf Arab and Chinese banking sources in Hong Kong.

Several top Gulf central bankers immediately dismissed the talk, and the vice chairman of China's central bank made no mention of such a move in a speech.

The report is "absolutely bullish," for gold, said Peter Grandich, a metals writer at Agoracom. "I've not see gold's fundamentals this bullish in years."

The December contract for gold, the most-active on the Comex division of the New York Mercantile Exchange, closed Monday with a gain of $13.50, or 1.3%, at $1,017.80 an ounce. By the morning in London, December gold was up $2.80 to $1,020.70.

In mid-September, futures prices had climbed past $1,025 to hit a fresh 18-month high. The record intraday price for a front-month gold contract is $1,033.90, set on March 17, 2008.

Many analysts had attributed the gains Monday to higher demand in the face of more weakness in the U.S. dollar. See Metals Stocks.

But, as Spina pointed out, trading gold and other currencies in exchange for oil would "establish gold as a recognized medium of exchange, returning it a step closer to its role as money on a world trade system."

So the price of gold "should continue to find upward price pressures on this news," he said.

At the same time, "the domination of the U.S. dollar is further removed and really, it has been the pricing of oil in dollars for trade that has given it a huge boost in its demand globally," said Spina.

If the dollar is presently being used to transact oil between these nations, then they must use many billions of dollars to do so, he explained.

"If they will switch away from the U.S. buck, then all that demand disappears, the need for the U.S. dollar diminishes, and its value should reflect this," he said.

At last check, one U.S. dollar bought 88.97 Japanese yen, down from 89.49 yen in late New York Trading Monday. One euro bought $1.4726, up from $1.466.

"Transacting in gold will boost demand [for gold] as the U.S. dollar's role diminishes," said Spina.

All in all, "this news is certainly bullish for gold's prospects for further use in international trade going forward," he said.