Gold briefly hits highest level in nearly six years, $367.70

War fears fuel resurgence in market for the metal

January 24, 2003|By BLOOMBERG NEWS

NEW YORK - The price of gold rose yesterday for a third session, reaching its highest level in almost six years, as the threat of a U.S.-led war against Iraq and a weakening of the dollar increased investor demand for the metal.

Gold prices have risen 4.7 percent this month, extending last year's 25 percent rally. The metal's allure has increased since President Bush's warning to Iraq that it faces attack unless it rids itself of weapons of mass destruction.

The dollar fell to a three-year low against the euro and weakened against the yen amid concerns over a war, making dollar-priced gold cheaper for buyers using those currencies.

"Bush is looking very pushy to go into Iraq, and it's buoying the gold price," said Domenick Nardo, a gold trader at FIC Commodities in New York.

Gold for February delivery rose $4.80, or 1.3 percent, to $364.70 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price for a most-active contract since February 1997. Earlier, the contract touched $367.70, the highest price since January 1997.

Last year's gold rally was the biggest since prices more than doubled in 1979 as rampant inflation eroded the value of competing fixed-income assets such as bonds.

"That gold is moving higher and will continue much higher should surprise no one," said Lawrence Edelson, a gold analyst at Weiss Research in Palm Beach Gardens, Fla. "This is a bull market."

Gold may reach $409 an ounce in the next three months, he said.

Prices had languished below $300 an ounce for most of 2000 and 2001 before rebounding last year as stock market declines and a weaker dollar made gold an attractive alternative for investors.

Heightened expectations of a U.S. attack against Iraq have helped extend gains into the new year, said Wayne W. Murdy, chairman and chief executive officer of Newmont Mining Corp. of Denver, the world's largest gold producer.

Hedge funds and other large speculators as of Jan. 14 had bought almost three times as many gold-futures contracts as they had sold, a report last week from the U.S. Commodity Futures Trading Commission showed.

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