SAN FRANCISCO (MarketWatch) -- Gold futures tallied a three-session win of nearly $27 an ounce Tuesday, boosted by oil's surge to a record high above $122 a barrel and further weakness in the U.S. dollar.

Gold for June delivery closed at $877.70 an ounce on the New York Mercantile Exchange, up $3.60 for the session. The contract has now climbed $26.80 from Thursday's closing level of $850.90.

"Gold has corrected the oversold condition that developed last week," said Ned Schmidt, editor of the Value View Gold Report. "Speculation in the paper oil market seems to be dominating all."

“ 'An overdue correction in paper oil could give us a lower gold price, and a great chance to buy.' ” — Ned Schmidt, Value View Gold Report

Crude-oil futures gained for a third day, touching a new record above $122 a barrel, as weakness in the U.S. dollar and global supply concerns continued to boost oil prices. See Futures Movers.

But Schmidt said in emailed comments that "with no apparent real shortages of oil around the globe, paper oil prices may be at great risk."

And "an overdue correction in paper oil could give us a lower gold price, and a great chance to buy," he said.

Over in the currency markets Tuesday, the U.S. dollar traded lower against most of its major rivals. The dollar index, which measures the greenback against a basket of six major currencies, was at 73.007 Tuesday, down from 73.190 in late North American trading Monday. See Currencies.

Dollar weakness tends to benefit dollar-denominated commodities, such as gold and crude oil, because it makes them cheaper for holders of other currencies.

"Seasonally strong physical demand should continue to provide a good base for gold in the coming sessions, and with oil prices setting fresh records, investors may look to increase their gold holdings as a hedge against inflation," said James Moore, an analyst at TheBullionDesk.com, in a research note.

Also on the Nymex, July silver rose 3 cents to close at $16.86 an ounce, and July platinum gained $42.40, or 2.2%, to end at $1,969.80 an ounce. June palladium rose $6.95 to close at $431.40 an ounce.

July copper futures fell by 7 cents to end at $3.88 a pound after climbing more than 3% in the previous session.

On the equities side, the Amex Gold Bugs Index HUI, gained 1.3% to close at 413.78 points.