MercoPress. South Atlantic News Agency

Gold price reaches highest in 25 years

Gold surged above $720 an ounce in New York for the first time since October 1980 and platinum reached a record as tensions increased over Iran's nuclear-research program.

The U.S. government said a letter from Iran's president hasn't reduced efforts to halt the Islamic republic's nuclear research.

Gold also gained on speculation that central banks will sell their dollar reserves and buy gold. Some of China's economists are urging the country to quadruple its gold reserves to 2,500 tons from 600 tons, the Reuters news agency said, citing an official industry newspaper. China's reserves have remained little changed since December 2002.

Geopolitical turmoil can spur investors to buy precious metals as a store of value.

Gold in New York reached a record $873 in January 1980 after a 1979 Iranian revolution slashed oil exports and spurred 12 percent inflation in the U.S.

"No one is buying Iran's overtures," said Frank McGhee, chief metals trader at Integrated Brokerage Services. "This is purely a geopolitical move for gold. We've been here before. The difference is that this time, there are nukes involved."

Gold futures for June delivery rose $21.60, or 3.2 percent, to $701.50 an ounce on the Comex division of the New York Mercantile Exchange, the highest close since Sept. 25, 1980. Prices earlier reached $702.20 and are up 64 percent in the past year.

Gold on the Comex has gained 27 percent since Jan. 9, when Iran said it had resumed nuclear research.

A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.

The gain in gold was the most since Sept. 14, 2001, when the market resumed trading after the September 11 terrorist attacks.