Updated from 3:03 p.m. EDT
Gold touched another 25-year high near $680 an ounce on Wednesday, before pulling back along with the price of crude oil after bearish U.S. inventories data.
Still, after trading lower in morning trade, gold for June delivery finished up $1.10 at $668.50, after earlier touching yet another quarter-century high at $679.80.
"The higher gold is going to get, the more some people are getting nervous," says Amaury Conti, equity trader at San Antonio-based investment adviser Austin Calvert & Flavin. "But there is still momentum in gold, and many are using a pull-back to get back into the market."
Among other metals, silver for July delivery dropped 41 cents to $13.79 an ounce. But July copper also reversed early weakness to finish up 2.85 cents at $3.30 a pound, interrupting the downward path seen over the past few sessions.
According to Charles Nedoss, metals analyst at the Peak Trading Group, copper was hit the most by news last week that China had 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, such as copper.
But "I think this was just an excuse to take profit," says Nedoss. "If
China goes from 10% growth to 9% growth, so what? We're fast approaching the key $3.20 level
on the July contract, which will be good time to jump back in."
Overnight, Australia's central bank raised its benchmark rate a quarter percentage point to 5.75%, its first rate increase in 14 months, according to
The hike added to the weakness in copper but gold and silver remained supported through the opening of the New York session, according to Nell Sloane, metals analyst at NSFutures.com.
Expectations that a rise in global interest rates may eventually derail world growth is overdone, or at least premature, according to Conti. "My view is that strong economies will continue to boost demand for commodities
and their prices until there's a quantifiable slowdown, which might not be until 2008."
Meanwhile, gold and silver have continued their bullish run amid dollar weakness, crude oil near $75 and high geopolitical tensions over Iran's nuclear ambitions.
Wednesday's drop in crude oil came after the Energy Department reported an unexpected rise in U.S. inventories of gasoline and oil in the latest week. In recent action, crude oil for June delivery was dropping $1.61 at $73 a barrel.
But the standoff between Western countries and Iran, the world's fourth-largest producer of crude oil, continue to provide support both for crude oil and gold. The precious metal acts as a hedge against inflation and as a safe-haven asset amid geopolitical uncertainties.
On Tuesday, the five permanent members of the U.N. Security Council -- the U.S., the U.K., France, Russia and China -- met in Paris to discuss possible sanctions on Iran, which has refused to bow to demands to stop its nuclear program.
The U.S. said it is pushing for "stiff" sanctions that may include the use of armed force, while China and Russia are said to oppose sanctions so far.
"I don't think
gold's bull run is over," says Nedoss. "There's enough going on in Iran to keep people on the edge of their seats."
Meanwhile, the soaring price of crude oil, so far, continues to fuel inflationary pressures while not derailing the U.S. and the global economy -- all bullish factors for gold and other metals, notes Sloane.
As for dollar weakness, it's increasingly grabbing traders' attention as it hovers near 11-month lows 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.
The greenback has slumped so far this year on expectations that the
will stop its 22-month-long campaign to raise interest rates. Fed Chairman Ben Bernanke last week seemed to hint that the Fed was considering to pause the campaign.
But Monday afternoon,
Maria Bartiromo reported that Bernanke told her over the weekend that markets had misunderstood his remarks and that he didn't want to send dovish signals.
In a speech Wednesday, Bernanke stayed clear of economic and monetary policy themes.
Meanwhile, shares of metal-mining companies headed lower. The Philadelphia Gold and Silver index finished down 1.2%, the Amex Gold Bugs index lost 1.8%, and the CBOE Gold index was down by 1%.
dropped 0.5%. The Toronto-based company, now the world's largest gold producer since its acquisition of
, posted better-than-expected profits after the close thanks to soaring gold prices.
Barrick reported earnings of $224 million, or 29 cents per share, for the first quarter, compared with $66 million, or 12 cents per share, the year-earlier quarter. The Thomson Financial consensus forecast of analysts was for earnings of 23 cents.Barrick shares were recently up 0.2% in after-hours trading.
lost 1.8% after posting first-quarter earnings of 13 cents vs. 2 cents the year-earlier quarter, missing the Thomson Financial consensus forecast of 17 cents.
( MDG), whose first-quarter earnings topped expectations by 1 cent on Tuesday gained 2.4%.
While dollar weakness might be benefiting the price of gold, Lehman Brothers metals analyst Peter Ward notes that it isn't good for those mining companies under his coverage that have substantial operations in Australia, Canada and South Africa, where local currencies have been appreciating.
Meanwhile, some mining stocks, such as Idaho-based miner
, down 1.7%, and Denver-based
Apex Silver Mines
-- which lost another 2.4% after a 17% plunge Tuesday -- have also been hit by concerns over the potential nationalization of their assets in Bolivia.
Bolivian President Evo Morales, who announced Monday the nationalization of the country's gas projects, said he was also planning the same for Bolivia's vast mining industry, which includes gold and silver projects.
, which owns an 88% stake in a gold mine in Bolivia, dropped 2.8%.
, which has some royalty interests in Bolivia, also fell 2.8%.