U.S. gold futures finished above $880 on Tuesday after climbing to a record high, fueled by surging oil prices, a weakening dollar and tensions between the United States and Iran sparked demand for the precious metal.

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

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, O'Byrne said.

The most-active gold contract for February delivery GCG8 jumped $18.30, or 2.1 percent, to $880.30 an ounce on the COMEX metals division of the New York Mercantile Exchange. The contract hit a session high of $884.00, surpassing the previous record high of $875 set Jan. 21, 1980, for COMEX futures on a continuous spot-month basis.

Rising prices for oil and other commodities, combined with a weaker U.S. dollar, all contributed to a higher gold price. Light, sweet crude for February delivery rose $2.35 to $97.44 a barrel Tuesday on the New York Mercantile Exchange. While the dollar fell against the euro. During late afternoon trading, the euro was at $1.4707, up from $1.4696 late Monday in New York.

Those factors increase the metal's allure as a hedge against inflation; gold is also seen as a safe investment against political and economic uncertainty. A cheap dollar can make commodities more attractive as an alternative investment, and can also raise demand from foreign buyers as their currencies gain strength.

Political tensions were stirred today when five Iranian speedboats harassed three U.S. Navy ships over the weekend in the Strait of Hormuz, according to media reports. Bush said Iran committed a provocative act while Iran dismissed U.S. concerns over weekend incident, saying it was a routine contact, Reuters reported.

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.