Gold futures surge after initial crude rally

Oil eventually closed lower, as did other commodities; soybeans, rice, gasoline and heating oil futures all declined.

Gold for June delivery jumped $13.50 to settle at $880 an ounce on the New York Mercantile Exchange, after earlier rising as high as $888.50.

"We've seen projections for $150 crude so that's adding to inflation fears and helping gold," said Carlos Sanchez, analyst with CPM Group in New York. "Oil has fallen back but gold is still hanging in positive territory."

Higher crude prices tend to lead to higher inflation, prompting investors to shift funds into hard assets like gold and silver, which are known for holding their value.

Gold prices have gained 26 percent in the last year, driven up by a weak dollar, record-high crude prices and nervousness about the U.S. economy. The metal has lost some value lately as the dollar has stabilized, falling well below its all-time high of $1,038.60, reached March 17.

Other precious metals also rose Thursday. July silver added 7.2 cents to settle at $16.685 an ounce on the Nymex, while July copper gained 5.75 cents to settle at $3.7385 a pound.

In energy futures, oil jumped near a record earlier Thursday before ending slightly lower, a drop analysts attributed to the expiration of options and to a sharp drop in natural gas prices.

Contributing to the volatility, the June crude contract expires next week. Oil prices sometimes trade erratically as investors square positions ahead of a contract expiration.

Light, sweet crude for June delivery fell 10 cents to settle at $124.12 a barrel on the Nymex after rising as high as $126.64 earlier in the session.