Prices for industrial metals surged Tuesday after U.S. factory orders improved slightly in May, raising hopes for stronger demand in the months ahead.

Other commodity prices also rose because of investor expectations that central banks may do more to promote global economic growth after manufacturing slowed in June in the U.S. and China, the world's two biggest economies.

After two months of declines, U.S. factory orders increased 0.7 percent in May from April, the Commerce Department said. Businesses ordered more equipment, including computers and machinery.

Copper for September delivery rose 6.95 cents Tuesday to finish at $3.5345 per pound, its highest level since mid-May. September silver gained 78.1 cents to $28.28 per ounce, October platinum increased $33.10 to $1,491.40 per ounce, and September palladium rose $20.90, or 3.6 percent, to $598.90 per ounce.

The metals are used in a wide range of products, from building materials and automobiles to appliances and computers.

The factory orders were released a day after the government said that U.S. manufacturing production shrank in June for the first time in nearly three years. June manufacturing also slowed in China.

Those reports have led investors to buy commodities in hopes that central banks will take additional steps to help the world economy. The European Central Bank may cut its key interest rate Thursday to a record low below 1 percent.

Kingsview Financial analyst Matt Zeman said investors figure that as negative economic news piles up, central banks are more likely to take action.

Last month, the Fed agreed to extend a program designed to drive down long-term interest rates. It also plans to keep short-term rates at record lows until at least late 2014. The goal is to entice businesses and consumers to borrow and spend more.

Commodity prices have been supported in the past in part by the Fed's bond-buying programs. The bank bought Treasury bonds and mortgage-backed securities to push down long-term interest rates and stimulate borrowing and spending.

Those Fed programs kept interest rates low and pressured the dollar, which weakened against other currencies. Commodities are priced in dollars, so a weaker dollar makes them more of a bargain for traders who use other currencies.

In Tuesday's trading, gold for August delivery gained $24.10 to end at $1,621.80 per ounce.

Meanwhile, oil prices skyrocketed after Iran again threatened to block a shipping route in the Persian Gulf in response to a European embargo of Iranian oil. The country has sparred for months with the West over its nuclear program.

Benchmark oil jumped $3.91, or 4.7 percent, to finish at $87.66 per barrel in New York. Heating oil increased 8.26 cents to end at $2.7585 per gallon, wholesale gasoline gained 9.9 cents to $2.7229 per gallon and natural gas ended up 7.5 cents at $2.899 per 1,000 cubic feet.

In agricultural crop contracts, corn for December delivery gained 18.75 cents to finish at $6.745 per bushel, November soybeans increased 36.75 cents to $14.7475 per bushel and September wheat rose 26.75 cents to $7.9925 per bushel.