Gold Shakes Early Funk

Updated from 12:56 p.m. EDT

Gold and metals finished higher in volatile trading Tuesday, as the dollar reversed early strength.

Gold for August delivery finished on a gain of $8.10, or 1.4%, to close at $580.50 an ounce. Among other metals, silver for July delivery rose 30 cents, or 3%, to $10.27 an ounce.

Copper for July delivery gained 3.5 cents, or 0.1%, to $3.09 a pound amid concerns over strikes at BHP Billiton (BHP Quote) and other producers in Chile.

Copper producers all advanced along with the price of the metal, as workers at Chile's Escondida mine, which produces 7% of the world's copper, threatened to strike if BHP didn't agree to wage increases.

At the same time, the Chilean government boosted its estimates of GDP growth this year based on raised forecasts of copper prices. It now expects copper prices to average $2.40 a pound, compared with $1.25 previously.

BHP was recently up 2.3%, Phelps Dodge (PD Quote) was up 1%, Freeport McMoRan (FCX Quote) was up 1.3%, and Southern Copper (PCU Quote) was up 1%.

Early in the day the dollar got a short-lived boost and metals slid on news that U.S. housing starts rose 5% in May, interrupting a three-month decline, fueled expectations of further rate hikes by the Federal Reserve. A stronger greenback pressures the price of dollar-denominated commodities such as gold, as it takes less of the currency to buy the same amount of gold.

But the Dollar Index, which tracks the greenback against a basket of key currencies, was recently down 0.3%.

The dollar fell back mostly against the yen after overnight comments from Bank of Japan Governor Toshihiko Fukui fueled expectations that the BOJ will hasten a process to unravel its five-year-old policy of keeping interest rates near zero.

Fukui said that interest rates need to move from zero "without delay," according to Bloomberg.

Adding further pressure on the dollar, the European Central Bank is also widely expected to continue hiking rates a few more times this year, according to Michael Gregory, interest rate strategist with BMO Nesbitt Burns.

Sweden and Norway, two non-euro-zone countries, have also hiked rates over the past two days and said that rates may have to move higher than markets expect, he notes.

The Fed, meanwhile, is widely expected to tighten next week and possibly once more this year before pausing its two-year-long campaign of incremental rake hikes. The Fed is facing increasing evidence of a slowing housing market, which might eventually pressure it to pause.