NEW YORK (MarketWatch) -- Gold futures closed at a new all-time high on Tuesday, soaring as high as $883.80 in intraday trading, as dollar weakness, rallying crude-oil prices and tensions between the United States and Iran boosted demand for the precious metal.

Silver and copper futures also posted strong gains.

Gold for February delivery hit an intraday high of $883.80 an ounce on the New York Mercantile Exchange, surpassing the previous record of $875 set on Jan. 21, 1980. The contract surged $18.30 to end at $880.30 an ounce, a new all-time closing high.

Still, the new record high was considerably lower than the inflation adjusted peak of about $2,200 per ounce. Spot gold also reached a record.

"Large funds and specs continue to buy and hold into this gold rally, and I believe that you will continue to see the trend of long gold, long crude continue throughout 2008," said Zachary Oxman, a senior trader at Wisdom Financial.

“ "I believe that you will continue to see the trend of long gold, long crude continue throughout 2008." ” — Zachary Oxman, Wisdom Financial

"Geopolitical worries are still forefront in traders' minds along with continued dollar weakness," Oxman said.

The dollar was mixed, as investors weighed weak home-sales data against remarks from a U.S. Federal Reserve official suggesting he wouldn't support a deeper cut to interest rates.

The dollar index, which tracks the performance of the greenback against a basket of other currencies, edged down 0.1% to 76.095. See Currencies.

"Gold's strength is likely due to buying on inflation hedging, credit crisis risk and general macroeconomic and geopolitical risk," said Mark O'Byrne, director of Gold and Silver Investments Ltd., in a research note.

"The incident in the strategically vital Strait of Hormuz highlights that geopolitical risk remains heightened," he said.

Five Iranian speedboats harassed three U.S. Navy ships over the weekend in the Strait of Hormuz, according to media reports. The Iranian boats approached the U.S. vessels and threatened in a radio transmission to blow them up. The U.S. ships were about to open fire when the Iranian boats retreated.

U.S. Secretary of State Condoleezza Rice said that the actions of the Iranian boats were provocative and dangerous, while Iran described the event as "an ordinary occurrence," the BBC reported on Tuesday.

Crude-oil futures rose 2%, rebounding from their steep decline in the previous session, amid expectations for an eighth consecutive drop in U.S. crude supplies. See Futures Movers.

"Deepening recession and earnings jitters increases our conviction in gold, which seems well positioned for early-08 by virtue of investment demand, competitive currency devaluations, and the reflation trade amply on display in oil," said John Hill, an analyst at Citigroup, in a research note dated Jan. 6. He expects strong safe-haven demand for gold in the event of US recession, and a test of $1,000 an ounce at some point.

There is upside risk to Citigroup's gold forecasts of $750 in 2008, $800 in 2009 and $820 in 2010, Hill said. He sees significant value in gold equities and has selected Barrick Gold Corporation ABX, +1.93% as his top pick into 2008.

"Looking out to mid-year, we favor copper as the most defensive, yet aggressively pro-cyclical, China-centric industrial metal," Hill said.

Also on Nymex, other metals futures posted strong gains. March silver rose 52.50 cents, or 3.4%, to end at $15.815 an ounce and January platinum surged $29.40, or 2%, to $1,553.60 an ounce.

March palladium rose $4.95 at $381.80 an ounce. March copper rallied 15.75 cents, or 5%, to end at $3.2985 a pound.

Metals stocks surge

Indexes tracking mining and metals shares rallied on Tuesday. The Philadelphia Gold and Silver Index XAU, +1.17% rose 3.2% at 188.43 points. The CBOE Gold Index GOX rallied 3.9% at 196.17 points and the Amex Gold Bugs Index HUI, surged 4.2% at 454.11 points.

As for sector's exchange-traded funds, the StreetTracks Gold Trust ETF GLD, +0.84% rose 2.4% at $86.78, the iShares Silver Trust ETF SLV, +2.18% gained 3.6% at $155.90 and the Market Vectors-Gold Miners ETF GDX, +1.28% rallied 3.6% at $50.80.

Gold warehouse inventories rose by 49,538 troy ounces to stand at 7.4 million troy ounces as of late Monday, according to Nymex data. Silver stockpiles dropped by 761,765 troy ounces to stand at 132.6 million troy ounces as of late Friday, while copper supplies edged down 160 short tons to 14,931 short tons.