Gold Rises Amid Iran Tension

Heightened worries about the possibility of escalating tensions between the U.S. and Iran kept gold prices firm Monday.

Contracts for April delivery of gold were rising $2.70 to $689.40 an ounce on the Comex division of the New York Mercantile Exchange.

The bullion exchange-traded funds that hold the metal were also gaining, with streetTracks Gold Shares (GLD Quote - Cramer on GLD - Stock Picks) and iShares Comex Gold Trust (IAU Quote - Cramer on IAU - Stock Picks) both up 0.4%.

Vice President Dick Cheney indicated Sunday that the U.S. wouldn't rule out the use of force in order to prevent Tehran's firebrand president, Mahmoud Ahmadinejad, from continuing his country's suspected nuclear weapons development.

In response, Ahmadinejad snapped back that Iran has no "reverse gear" for its atomic program, which he says is only aimed at producing energy.

Such verbal fireworks helped boost interest in gold as a safe-haven investment. But one observer sees the current verbal sparring as little more than theatrics aimed at impressing each side's domestic populace.

"I think in reality the diplomats are out in force," says Bernard Hunter, director of precious metals at bullion bank ScotiaMocatta in Toronto. He points to the recent negotiated settlement in which North Korea agreed to give up its nuclear weapons as a likely template.

Elsewhere, the precious-metals team at Barclays Capital in London notes that gold continues to take direction from the greenback, which in turn should take its lead from a slew of economic data due out later in the week.

Tuesday will see new figures on existing-home sales for January, followed by a preliminary reading on fourth-quarter gross domestic product a day later. Set for release Wednesday are numbers on last month's new-home sales.

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