Updated from 12:36 p.m. EST

Gold finished lower on Thursday, amid profit-taking ahead of a three-day holiday weekend. But the precious metal finished up from its lows and above the key $600 level as crude oil prices bounced back in late trading

After strong gains this week, which led gold twice to close above $600 at 25-year highs, the market was due for some profit-taking, according to Nell Sloane, metals analyst at NSFutures.com.

Gold for June delivery finished down $1.20 at $600.10 an ounce, but above a low of $594 earlier that morning.

Reports that high prices are impacting jewelry demand in Asia, leading to scrap gold sales in Singapore, also added to early weakness, she wrote in her daily commentary.

Once again, the yellow metal also followed the lead of crude oil, which dipped in morning trade but came back to close up 70 cents at $69.32. Gold acts both as an inflation hedge against soaring energy costs and as a safe haven amid geopolitical jitters. In recent weeks, rising tensions over Iran's nuclear ambitions have sent both oil and gold sharply higher.

These tensions have now become part of the "market dialogue", according to Sloane.

Last weekend, media reports suggested the Bush administration was considering a military attack of Iran. On Tuesday, Iran said it had begun enriching uranium, a process which can lead to the development of nuclear weapons, but which Tehran says is for civilian use only.

Western nuclear analysts quoted by the

New York Times

on Thursday said that a nuclear Iran was still years away, even as an Iranian official indicated that Tehran will seek to accelerate the enrichment process.

Silver, which has been rising in anticipation of a silver exchange-traded fund (ETF), finished up 19.2 cents at $12.855 an ounce.

Meanwhile, copper again advanced to record highs. The base metal gained 4.40 cents to $2.8155 a pound, after touching yet another all-time high of $2.8190.

Copper, like most base metals, has been rising on expectations of strong global growth. On Thursday, it benefited from news that U.S. retail sales have bounced back in March, after slumping in February.

Also boosting the metal, Goldman Sachs lifted its 2006 price forecast for copper to $2.35 a pound from $2.20 previously, and its 2007 forecast to $2.10 a pound from $2.00 previously. The firm cited continued supply shortages and strong demand from China.

Gold, however, has been rising partly on expectations that a U.S. economic slowdown later this year will lead the

Federal Reserve

to stop raising interest rates and to a slide in the dollar, according to the London-based metals consultancy GFMS. A weak greenback normally boosts the value of dollar-denominated commodities.

But higher interest rates don't spell good things for most commodities, says Jack Ablin, chief investment officer at Harris Bank. "Real assets, which act as inflation hedges, are in a constant battle with overnight paper

short-term debt instruments that track short-term interest rates," he says.

Noting that on average the Dow Jones AIG Commodity Index is down fractionally year-to-date, Ablin sees the influence of the rising Fed funds rate. The Fed has lifted its key rate 15 times since June 2004.

Furthermore, should commodity prices continue rising, the Fed would see this as evidence of rising inflation expectations and continue to raise rates further, Ablin says.

"Financial assets should slowly eclipse the value of real assets with rates rising," he says.

Most metals, however, have been rising independently of interest rates expectations, according to John Hill, metals analyst at Citigroup. Big declines in the Dow Jones AIG Commodity Index year-to-date mostly come from drops in natural gas (down 40%), lean hogs (own 16.5%), live cattle (down 10.8%) and soybeans (down 6.8%).

Among metals, meanwhile, zinc is up 60.5% year to date, silver is up 42.5%, nickel is up 33.8%, copper is up 31.7%, unleaded gas is up 22.2% and gold is up 14.2%, according to Harris Bank.

Noting that precious metals have benefited from surging oil and geopolitical tensions, Hill says that gold in particular has shrugged off negative correlations with a stronger dollar and with rising interest rates since 2005.

"Classic goldbug theories about understated inflation, runaway money supply growth, and a stealth cycle of competitive currency devaluations, suddenly seem less far-fetched," Hill wrote in a note to clients.

Meanwhile, the stocks of metals miners gained Thursday, even as gold traded lower. The Philadelphia Gold and Silver index rose 0.5%, while both the Amex Gold Bugs index and the CBOE Gold index advanced 0.7%.

Among the biggest gainers,

Agnico Eagle Mines

(AEM) - Get Report

rose 3.0% and

Goldcorp

(GG)

rose 1.4%.

Goldman Sachs lifted its fair-value estimates on the shares of

Phelps Dodge

( PD) to $99 from $93 and of

Freeport McMoran

(FCX) - Get Report

to $70 from $66 previously. Freeport, which reports earnings next week, rose 1.05%. Phelps dropped 0.3%.

Goldman has an investment banking relationship with and owns shares of both mining companies.

Newmont Mining

(NEM) - Get Report

dropped 0.2% after announcing it bought 28.5 million shares of Denver miner Queenstake in a private placement at 41 Canadian cents a share.