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Gold vaults to 7-year peak
LONDON, England (Reuters) -- Gold vaulted to a seven-year high on Tuesday as Washington prepared to make its case against Iraq to the U.N. Security Council, prompting nervous investors to seek a safe cache for their money. Spot gold traded at $376.50 an ounce, its firmest level since November, 1996. U.S. Secretary of State Colin Powell has pledged to provide ``sober and compelling proof'' that Baghdad is hiding banned chemical weapons from U.N. arms inspectors. "I think the market's quite nervous ahead of that speech,'' said David Thurtell, a commodities strategist at Commonwealth Bank in Sydney. ``It really is sort of make or break for the U.S. case for war in Iraq.'' The metal has gained almost almost 10 percent since the start of the year, boosted by war clouds over Iraq, spiking oil prices, slumping stocks and a weak dollar. Tensions over North Korea's nuclear ambitions have also contributed to the rally. U.S. aircraft and warships were put on alert for possible deployment to deter the communist nation as the U.N. nuclear watchdog set a key meeting next week expected to refer the nuclear crisis to the Security Council. Japanese investors led the charge in bullion, pouring funds into gold futures on the Tokyo Commodity Exchange (TOCOM), where prices scaled 8 1/2-year peaks. Spot gold was fetching $375.25/376.00 an ounce at 0658 GMT, up from $371.10 last bid in New York. Koji Suzuki, a commodities analyst at Itochu Futures Corp in Tokyo, said buying was also partly encouraged by a softer yen, which makes TOCOM futures cheaper relative to dollar-based gold prices. On Monday, the exchange logged its biggest-ever turnover of commodity contracts, while open interest for gold -- a key measure of liquidity -- went through the roof. That worries some traders, who say the glut of long positions on futures exchanges in Tokyo and New York indicates a looming correction for lofty gold prices. "The market's really overbought,'' said Gordon Cheung, director of precious metals trading at Mitsui Bussan in Hong Kong. ``When will the crash come? It's hard to say... War's likely to happen, so nobody dares to go short.'' PLATINUM ON A ROLLGold's lustre rubbed off on other precious metals, helping to drive platinum to new 23-year highs above $700 an ounce. The metal, used mainly in automobile catalysts and in jewellery, was quoted at $704.00/711.00 an ounce, up from $698.00/708.00 at the late New York close. Platinum has gained more than 17 percent this year, supported by increasing demand from the auto sector, a global supply deficit and fears of output disruptions in top producing countries. Last week, the metal got a boost from a call by U.S. President George W. Bush for greater research into fuel-cell technology, which relies on platinum as a catalyst to create electricity without pollution. Traders said the market was on edge after labour leaders at Russia's Norilsk Nickel , the world's fifth-largest platinum producer, said a warning strike could be just days away after wage talks broke down.
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