May 9 (Bloomberg) -- Gold jumped to $700 an ounce in New York for the first time since October 1980 and crude oil rose above $70 a barrel as tensions increased over Iran's nuclear- research program.

The U.S. government said a letter from Iran's president has not reduced its determination to halt the Islamic republic's plan to enrich uranium. Geopolitical turmoil can spur investors to buy precious metals. Gold touched a record $850 an ounce in January 1980 after the 1979 Iranian revolution cut oil exports. Oil fell yesterday after Iran said the letter was sent.

``No one is buying Iran's overtures,'' said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago. ``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 close at $701.50 an ounce on the Comex division of the New York Mercantile Exchange. Prices earlier reached $702.20. The precious metal has surged 33 percent this year.

Gold on the Comex has gained 25 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.

Platinum for immediate delivery advanced $41, or 3.4 percent, to a record $1,236.50. Prices have climbed 41 percent in the past 12 months.

Crude oil for June delivery rose 92 cents, or 1.3 percent, to close at $70.69 a barrel on the Nymex. Oil touched $71.45 a barrel during the session. Futures reached $75.35 on April 21 and 24, the highest since trading began in 1983. Prices are up 36 percent from a year ago.

Oil's $70 Floor

``The near-term floor of prices is somewhere around $70'' a barrel for oil, said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``There are people in the market who see prices around there as a buying opportunity.''

Gold also gained on speculation 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, Reuters said, citing an official industry newspaper. China's reserves have remained stable since December 2002.

``China wants to move away from U.S.-denominated assets,'' said John Licata, chief investment strategist at Blue Phoenix Inc., an energy and precious-metals consulting company in New York. ``This is good for gold as the dollar weakens.''

Licata expects gold to touch $850 this year. He correctly predicted gold would reach $500 in 2005.

Oil Jumps

The U.S. said Iranian President Mahmoud Ahmadinejad's letter to President George W. Bush failed to deal with the nuclear dispute that is now under consideration by the United Nations Security Council.

Concern that the standoff over Iran's nuclear research would lead to sanctions against Iran, the fourth-biggest oil producer, contributed to a 16 percent jump in crude oil prices this year. The increase in tension comes as militant attacks cut Nigerian and Iraqi production.

President Bush said today the U.S. and other UN members are still in an ``early stage'' of diplomatic efforts to prevent Iran from building a nuclear bomb. The Iranian government must respond to the ``rational demands of the world'' by stopping research to enrich uranium and allowing full international inspections of its nuclear program.

``Our objective is to not let them get the bomb first of all,'' Bush said, adding that most nations of the world ``have come together around that goal.''

Gold's Allure

A weaker dollar is helping boost the allure of gold. The metal traditionally moves in the opposite direction of the currency. That relationship changed last year as gold gained 18 percent while the dollar climbed 14 percent against the euro.

The dollar approached a one-year low against the euro amid speculation the Federal Reserve will pause in its interest-rate increases after its raises borrowing costs for a 16th consecutive time tomorrow.

``People who are bullish on gold are doubtful the Fed is committed to fighting inflation,'' said Daniel Vaught, an analyst at A.G. Edwards & Sons Inc. in St. Louis.

A government report tomorrow is expected to show that U.S. oil supplies fell last week as refiners increased gasoline output.

``We are waiting for tomorrow's report to give us a better idea of what to do,'' said Bill O'Grady, an analyst with AG Edwards & Sons in St. Louis. ``The focus will be on refinery runs and what that means for gasoline stocks. We'll also be paying attention to gasoline demand.''

Gasoline

Gasoline supplies probably increased 1 million barrels in the week ended May 5, up from 202.7 million the prior week, according to the median of forecasts by 16 analysts before an Energy Department report tomorrow. Last week's report showed that inventories rose for the first time in nine weeks.

Gasoline for June delivery rose 4.3 cents, or 2.2 percent, to $2.0466 a gallon in New York. Futures are up 38 percent from a year ago.

``Tomorrow's report could take a lot more steam out of the gasoline market,'' Lynch said.

To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net; Mark Shenk in New York at mshenk1@bloomberg.net

Last Updated: May 9, 2006 15:19 EDT