Gold vaulted to its highest in more than six years 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, Reuters reports.
Gold was set or “fixed” in the London morning session at $374.85 an ounce, its highest level since November 1996 and up from the previous fix level of $369.50.
Prospects of a war in Iraq continued to dominate the outlook for the safe-haven metal, which has gained nine percent in value since the start of this year.
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,” David Thurtell, a commodities strategist at Commonwealth Bank in Sydney, reportedly said. “It really is sort of make or break for the U.S. case for war in Iraq.”
The metal has gained almost 10% since the start of the year, boosted by the 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.
Spot gold was fetching $373.85/374.60 an ounce at 1244 GMT (7:44 EST), up from $371.10/371.50 in New York on Monday, to touch its firmest level since late 1996.
Japanese investors led the charge in bullion, pouring funds into gold futures on the Tokyo Commodity Exchange (TOCOM), where futures prices scaled 10-year highs in record turnover.
Koji Suzuki, a commodities analyst at Itochu Futures Corp in Tokyo, reportedly said buying was also partly encouraged by a softer yen, which makes TOCOM futures cheaper relative to dollar-based gold prices.
But a glut of long positions on futures exchanges in Tokyo and New York indicated a looming correction for lofty gold prices, traders said.
“The political environment continues to bolster investor interest and in nervous conditions no one is prepared to call a top,” the World Gold Council in London, reportedly said.
Gold’s luster rubbed off on other precious metals, helping to drive platinum to new 23-year highs above $700 an ounce.
The metal was fixed in the London morning session at $703.00 an ounce, its firmest level since March 1980 and up from the previous fix of $698.00.
“Like a tanker in full speed, platinum seems to be difficult to stop. The current momentum is built on prospects for new technologies, jewelry demand and threat of a labor strike (at Russian mining firm Norilsk),” Andy Maag, metals analyst at UBS Warburg, reportedly said.
Spot platinum was quoted at $703.00/708.00 an ounce, up from $698.00/708.00 at the late New York close.
Platinum has gained more than 17% 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 President Bush for greater research into fuel-cell technology, which relies on platinum as a catalyst to create electricity without pollution.