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TOKYO, May 1 (Reuters) Gold rallied more than 1 percent to a fresh 25-year high on Monday from the previous session in New York as mounting tension over Iran's nuclear programme and a weaker dollar spurred buying from short-term funds.

Sentiment was bullish as near-record prices for oil and base metals, along with a sharp fall in the dollar in the currency market, fueled aggressive investor buying in gold.

''Gold is in a strong uptrend. The biggest factor now is growing geopolitical tensions because of Iran,'' said Shuji Sugata, assistant manager at Mitsubishi Corp Futures and Securities Ltd.

''It's important that gold broke through $650, but the rise was a bit too quick,'' Sugata said.

Spot gold rallied as far as $661.10 per ounce on Monday, surpassing the previous 25-year high of $655.30 reached in New York on Friday.

As of 0547 GMT, spot gold was trading at $660.50/661.50, up more than 1 percent from $651.80/652.80 in New York on Friday.

Precious metals markets jumped on Monday, even though markets in Singapore and Hong Kong are closed and those in London and many other European countries will also be closed for a national holiday.

Geopolitical tensions are growing after the International Atomic Energy Agency reported Iran had ignored a call to halt nuclear activities and accelerated its uranium enrichment programme.

U.N. ambassadors from the United States, Britain and France are expected to introduce a resolution this week to legally oblige Iran to comply with the council's demands.

Gold was supported by a weaker dollar on Monday, which dropped to a seven-month low against the yen and hovered near a one-year low against the euro A weak dollar makes gold cheaper for holders of other currencies and boosts demand.

''Gold has already gained strong interest as inflationary fears have been growing. The growing tension over Iran is drawing additional buying interest,'' said Takashi Ogura, a manager at Kanetsu Asset Management.

''Short-term players and speculators are very aggressive, which should keep gold prices very solid.'' Tokyo Commodity Exchange gold futures rose more than 2 percent, but the strength of the yen slowed their gains. A stronger yen effectively lowers the value of yen-based gold.

The benchmark April 2007 TOCOM gold contract rose briefly by its daily 60-yen limit, or 2.52 percent, to 2,439 yen per gram.

At 0608 GMT, it was up 58 yen at 2,437 yen.

''Tokyo gold prices are slightly underperforming due to a higher yen, but they will follow the overall strength in dollar-based prices,'' Mitsubishi's Sugata said.

Silver was trading at $13.95/14.15 per ounce, up from $13.60/13.70 in New York on Friday.

Barclays Global Investors' new exchange traded fund, called iShares Silver Trust, began trading on the American Stock Exchange on Friday under the symbol SLV.

Platinum edged up to $1,160/1,170 an ounce, compared with $1,152/1,156 in New York.

Palladium was little changed at $370/380 an ounce against $370/375 in New York.

Precious Metals Prices by 0547 GMT Last Net Change Pct Move Gold 660.50 8.00 +1.23 Platinum 1160.00 8.00 +0.69 Palladium 370.00 -1.00 -0.27 Silver 13.95 0.28 +2.05 Change so far in 2006 Metal Latest bid End prev year Pct Move Gold 660.50 517.20 +27.71 Platinum 1160.00 968.00 +19.83 Palladium 370.00 254.00 +45.67 Silver 13.95 8.81 +58.34 The closing prices used to calculate the net change may differ from New York's last quoted prices.

REUTERS PV DS1152