SAN FRANCISCO (MarketWatch) -- Gold futures rallied to a close near $929 an ounce on Wednesday, with weakness in the U.S. dollar and soaring oil prices taking the metal's total price gain to more than 7% in five sessions.

"Clearly the gold market is riding on the waves of momentum generated from the ailing U.S. dollar and from extremely strong oil markets, among other driving forces," said Peter Spina, an analyst at GoldSeek.com. "There remains very good potential for gold to revive the powerful bull market momentum from earlier this year, which could carry it significantly higher in the coming weeks."

“ 'Oil is obviously leading gold and if the historical gold vs. oil ratio ever returns, we could see gold as high as $1,500.' ” — Peter Grandich, Grandich Letter

Gold for June delivery gained $8.40 to close at $928.60 an ounce on the New York Mercantile Exchange. It climbed as high as $931 in the regular trading session.

As of Wednesday, the contract has logged a gain of $62.10 since the May 14 close at $866.50.

"Oil is obviously leading gold and if the historical gold vs. oil ratio ever returns, we could see gold as high as $1,500," said Peter Grandich, editor of the Grandich Letter.

Gold's appeal as an inflation hedge was boosted by the surge in oil prices, which broke through another key level on Wednesday, this time topping $130 a barrel on the familiar fears that supplies can't keep up with growing demand from emerging markets. See Futures Movers.

Oil domination

"If ever there was an oil-dominated trading day, today was it as far as gold was concerned," said Jon Nadler, a senior analyst at Kitco Bullion Dealers. "Trading focus remains on just how far up the value scale crude oil can be pushed by speculators before either demand simply dries up or a global recession is triggered," he said in emailed comments.

"There's an inevitable correction in oil but after a short while, we should see money plow back in as oil, food and water shortages are going to make these commodities in high demand for years to come," Grandich said in emailed comments.

Spina also said there's likely to be a decline in the oil price. Part of the short-term risk/reward equation is "a sizeable pullback in the oil price as short-term gains appear overextended," he said in emailed comments.

And, as for the U.S. dollar, "prospects on the whole remain bleak and any short-term rebounds will be met with heavy selling," he said.

On the currency markets Wednesday, the dollar fell against most of its major counterparts, with the dollar index dropping to 71.91 from 72.459 in late North American trading Tuesday. Dollar weakness typically benefits dollar-denominated commodities, such as gold and crude oil, because it makes them cheaper for holders of other major currencies. See Currencies.

An official summary of the Federal Open Market Committee's April 30 meeting reinforced belief that the central bank has paused its rate-cutting cycle and clearly remains worried about inflation and growth. Immediately after the news, the dollar had little reaction, while June gold edged higher in electronic trading, but remained below $930.

Short-term trends in oil or the dollar could "inflict some damage into [gold's] renewed and growing momentum," said Spina. But "until the reversal in these pro-gold trends, I would be quite afraid to stand in front of this golden bull."

“ 'Gold is riding on oil's coattails, although it lacks the requisite internal fundamentals as we saw in yesterday's World Gold Council report.' ” — Jon Nadler, Kitco Bullion Dealers

Silver prices climbed along with gold to close at its highest level since April 17. July silver gained 33 cents, or 1.9%, to finish at $18.05 an ounce.

July platinum rose $73.20, or 3.4%, to close at $2,221 an ounce, June palladium tacked on $12.95 to end at $463.20 an ounce and July copper fell 3.55 cents to $3.7445 a pound.

The SPDR Gold Trust GLD, +0.84% closed up 1.2% at $91.96 and the iShares Silver Trust ETF SLV, +2.18% rose 2.1% to end at $178.60. The Market Vectors-Gold Miners ETF GDX, +1.28% fell by 0.2% to close at $48.63.

The World Gold Council said Tuesday that demand for gold exchange-traded funds doubled from the first quarter of last year, but demand for the precious metal in terms of tonnage dropped 16% to its lowest quarterly figure in five years. See full story.

"Gold is riding on oil's coattails, although it lacks the requisite internal fundamentals as we saw in yesterday's World Gold Council report," said Kitco's Nadler. "It is simply being dragged along at this stage.

On the equities side, the Amex Gold Bugs Index HUI, fell by 0.1% to close at 448.47 points, retreating from a high of 459.48.