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Gold above $370 on Iraq worries
LONDON, England -- The price of gold, a traditional safe-haven in times of uncertainty, surged on Monday above $370 an ounce for the first time in six years ahead of the U.N. weapons inspectors' report on Iraq. Gold rose to $372.55 in mid-morning London trading, up from a closing New York level of $369.10 on Friday. Bullion hit a high of $380 an ounce in November 1996 and some analysts believe it could reach that level again soon. "The next clear and sizeable band of resistance occurs towards $380 an ounce -- which is our primary price target," Kamal Naqvi, of Macquarie Bank, told Reuters. "However, the rallies in both 1993 and 1996 managed to break, albeit briefly, above $400 [an ounce] and this may well be used as a guide by aggressive speculators,'' he said. Gold, which has risen 30 per cent in the past year, has been attracting increasing attention as tensions mount between the U.S. and Iraq. Fears of a U.S.-led attack on Iraq have prompted many investors to pull their money out of the stock market and put it in gold. The dollar has also suffered because many expect a costly war with Iraq would hamper a recovery in the U.S. economy. Arms inspectors Hans Blix and Mohamed ElBaradei will appear before the U.N. Security Council later on Monday. They are expected to be critical of Iraq's cooperation but not come to a conclusion about whether Iraq is rebuilding its arsenal. (Full story) On Tuesday, investors will focus on U.S. President George W. Bush's State of the Union address for signs of a possible U.S.-led attack. "I guess if the tensions soften a little bit I would expect a correction in gold because it seems like it's pretty overbought for the time being,'' Peter Tse, a dealer at Scotia Mocatta, told Reuters.
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