Updated from 12:27 p.m. EDT
Gold started a new month by hitting a new 25-year high, as a slumping dollar and rising tensions over Iran's nuclear ambitions offset the impact of China's recent rate hike.
Though off its best level of the session -- and the past quarter-century -- at $664, gold for June delivery finished up $5.70 at $660.20 an ounce. Other metals followed gold's lead. Silver for May delivery advanced 37 cents to $13.88 an ounce, and May copper gained 11.45 cents to $3.45 a pound.
Metals and oil prices caught a bid after Secretary of State Condoleezza Rice said over the weekend that the U.S. would push the United Nations to impose sanctions against Iran, the world's fourth-largest producer of crude oil. On Friday, the UN's nuclear watchdog told the Security Council that Tehran refused to bow to demands to end its nuclear program and had successfully enriched uranium.
Also this weekend, Iranian deputy oil minister M.H. Nejad Hosseinian said he didn't believe the UN would impose sanctions because that would boost oil prices to "very high" levels. Crude oil for June delivery rose $1.82 cents to $73.70 a barrel.
Gold serves as a hedge against inflation, such as rising crude oil prices, and as a safe-haven asset amid geopolitical certainty. Meanwhile, other metals like silver and copper have been following its advance and received additional support from expectations of strong global economic growth.
Last Thursday, metals fell sharply after the People's Bank of China unexpectedly lifted interest rates for the first time since October 2004. The move, aimed at cooling the fastest-growing economy in the world, raised concerns that slowing global growth would cap demand for commodities.
However, the next day, gold and other commodities benefited from renewed weakness in the dollar. The greenback remained under pressure Monday as a series of strong economic reports failed to dash hopes that the
will soon pause in its 22-month campaign to raise interest rates. The dollar was lately trading at a seven-month low against the yen and near an 11-month low vs. the euro.
A weak dollar raises the value of dollar-denominated commodities, such as gold, as it takes more of the currency to buy the same amount of the commodity.
Meanwhile, a selloff in the bond market following strong economic reports had some believing the Fed might have more rate hikes in its future. Economic reports showed personal income and spending, as well as the manufacturing sector and construction spending, were all increasing at a healthy clip.
"To me, part of this bond market selloff is a thumbs down on
Fed Chairman Ben Bernanke," Tony Crescenzi, chief bond market strategist at Miller Tabak, said in a written comment on
, a sister site of
The dollar's 3.5% drop over the past two weeks and the ongoing surge in commodities are among the factors he sees as sending "strong signals" of rising inflation expectations.
Supported by all these ongoing bullish factors, gold gained nearly $68, or 12%, just in the month of April. Silver advanced 17% last month ahead of the launch of a silver exchange-traded fund. The ETF, much like the
fund, should make investing in the commodity easier for retail investors.
iShares Silver Trust
officially started trading Friday.
Many metals analysts and observers have been expecting a pullback in the market, but that becomes less likely amid continuing tensions over Iran and accelerating weakness in the dollar.
Peter Grandich, a metals analyst and editor of the
, says he's bullish long-term on gold. "Sheer momentum, combined with a sliding U.S. dollar and heightened geopolitical concerns, greatly underpins the long-term direction for gold," he wrote in a research note on Monday.
Even if his near-term target for gold at $650 to $700 has now been reached, Grandich is unwilling to predict when the rising trend will stop. "Is there a correction out there? Yes. Am I going to predict it? Absolutely not," he wrote.
After the close of the metals market, the dollar regained some ground when
reporter Maria Bartiromo revealed parts of a discussion she had with Bernanke over the weekend. The Fed chairman, she said, thought the media had misunderstood his remarks last week, and Bernanke insisted he doesn't want to send the market dovish signals.
That may weaken the support for gold and metals on Tuesday. Mining stocks lost some of their morning gains after the Bernanke comments hit the wires. The Philadelphia Gold and Silver index, the Amex Gold Bugs index and the CBOE Gold index all rose 0.5%, but finished below their session highs.
Among the gainers,
Golden Star Resources
was rising 4.0%, and
was up 1.7%.
rose 2.3%, and
rose 0.2%. Both companies are expected to report earnings on Tuesday.
gained 0.9% after the company said operations at its giant Grasberg mine in Indonesia returned to normal after weekend clashes near the mine, according to
. Freeport has been the target of protests in Indonesia amid accusations that the Grasberg mine hurts the environment and that the company isn't contributing to local economic prosperity.