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NEW YORK (MarketWatch) -- Gold futures surged to a new all-time high on Tuesday, soaring as high as $883.10, as dollar weakness, rallying crude-oil prices and tensions between the United States and Iran boosted demand for the precious metal.

Gold for February delivery hit $883.10 an ounce in electronic trading on the New York Mercantile Exchange, surpassing the previous record of $875 set on Jan. 21, 1980.

Still, the new record high was considerably lower than the inflation adjusted high of about $2,200 per ounce. Spot gold also reached a record.

"Large funds and specs continue to buy and hold into this gold rally, and I believe that you will continue to see the trend of long gold, long crude continue throughout 2008," said Zachary Oxman, a senior trader at Wisdom Financial.

"Geopolitical worries are still forefront in traders' minds along with continued dollar weakness," Oxman said.

Gold futures were last up $18.50, or 2%, to $880.50 an ounce in regular trading on Nymex.

"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," he said.

Five Iranian speedboats harassed three U.S. Navy ships over the weekend in the Strait of Hormuz, according to media reports. The Iranian boats approached the U.S. vessels and threatened in a radio transmission to blow them up. The U.S. ships were about to open fire when the Iranian boats retreated.

US Secretary of State Condoleezza Rice said that the actions of the Iranian boats were provocative and dangerous, while Iran described the event as "an ordinary occurrence," the BBC reported on Tuesday.

"Gold prices raced to a new record high this morning, with recession fears, a weak US dollar, high oil prices and renewed geo-political tensions all factors supporting the precious metal," said analysts at Action Economics.