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Gold Driven Up by Iran Jitters

Contracts for February delivery of bullion close up $4.60 at $626.90 an ounce.

Updated from 1:49 p.m. EST

Gold futures surged ahead Tuesday, fueled by renewed concerns over a nuclear Iran.

Contracts for February delivery of bullion closed up $4.60 at $626.90 an ounce on the Comex division of the New York Mercantile Exchange. Earlier in the session, the price spiked to an intraday high of $632.30 before partially pulling back.

The exchange-traded funds that hold inventories of gold were also gaining.

iShares COMEX Gold Trust


was up 0.6%, while

streetTRACKS Gold Shares


was ahead by 0.4%.

Last week the United Nations imposed sanctions against Iran, which has steadfastly refused to cease its uranium enrichment program. Although the county's leader says the nuclear activity is geared toward energy, many Western observers believe it is aimed at the development of atomic weapons.

Bullion prices tend to gain during periods of geopolitical tension.

"This time around, the scenario is unfolding on a new and more dangerous level," says Jon Nadler, a metals analyst at Montreal-based bullion dealer Kitco. "There is no leap of faith required in imagining that the impasse could escalate to a boiling point with very unpleasant consequences for all parties concerned."

In addition to the lift from the "Iranian flap," gold prices may benefit from a year-end rotation into bullion, notes a daily market brief from Chicago-based trading firm NS Futures. "There might be little resistance until the $634.80 level in February gold."

Elsewhere, in the currency markets, the greenback was gaining in light trading. One dollar was buying 119.135 yen, up from 118.81 yen late last week. One euro would purchase $1.3104, down from $1.3141 previously.

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In the gold patch, the

Amex Gold Bugs Index

was rising, fueled by the higher metal prices, and was up about 0.5% recently. Shares of




Yamana Gold


were up 1.1% and 0.7%, respectively.

Turning to base metals, Comex March-dated copper contracts closed 2.4 cents higher at $2.878 a pound, taking the lead from gold.

As for industrial metals, aluminum giant



said it reached a tentative agreement with striking United Auto Workers employees in Cleveland. The deal could see workers back on the job Jan. 2.

Shares of the smelting company were gaining 0.6% recently.