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Politics : Stockman Scott's Political Debate Porch -- Ignore unavailable to you. Want to Upgrade?

To: lurqer who wrote (10706)	12/21/2002 2:15:15 PM
From: stockman_scott	Respond to of 89467

Iraq war fears, weak dollar set gold bugs hopping BY DANIEL ROOK Agence France Presse December 19, 2002 Thursday Clouds of war over Iraq and weakness of the dollar have driven gold prices up to the highest points for nearly six years above 350 dollars an ounce on resurgent interest from investment funds, experts say. Spot gold prices raced up to 354 dollars an ounce in Asia on Thursday -- the highest level since March 1997 -- as sabre rattling by the United States towards Iraq sent investors fleeing for safe havens and oil prices soaring. Prices later eased back somewhat to an afternoon fixing of 345 dollars an ounce on the London Bullion Market, up from 339.50 dollars late on Wednesday to show a rise of about 20 dollars in two weeks. BNP Paribas analyst Charles Kernot said the upswing was "related to the continuing tensions that we've seen in Iraq, worries about the situation there." Concerns about a possible US-led war in Iraq resurfaced after the United States and Britain said Iraq's weapons declaration to the United Nations was incomplete. Another factor pushing gold prices higher has been a sharp fall in the value of the dollar recently, which makes gold cheaper in terms of other currencies. Analysts said that the move had been magnified by traders covering their positions after being caught by surprise by the extent of the recent upswing. Some experts now believe that technical factors have now overtaken fundamental influences in the gold market. "Above 340 (dollars per ounce) we're in a completely new zone where the technicals rule. It's not geopolitics, it's geometry," said Andy Smith, analyst at Mitsui Global Precious Metals. "Once we got through 340, much more was possible since most funds trade on technicals and whether it's cheese or anything, once you get a buy signal like that then they're willing to believe almost anything," he added. Gold has enjoyed a resurgence this year, a move which analysts attribute to a number of factors, including geopolitical and terrorism fears, weakness of the dollar, falling global stock markets, and reduced forward-selling by producers. The rally pulled prices out of a slumber seen in 2001 and 2002, when the precious metal was mostly stuck in a narrow trading range around 260-280 dollars an ounce. But gold prices still remain weak compared with levels seen in the 1980s and 1990s. After its heyday in early 1980, when prices peaked at 850 dollars an ounce, prices started on a slippery downhill slope. Since the demise of the gold standard and the start of free trading of gold on commodity markets in 1966, the importance of gold in world financial markets has diminished. As prices stagnated even during such events as the stock market crash of October 1987, many investors concluded that the precious metal no longer acted as a barometer of the world economy or as a store of value in uncertain times. Analysts note that one factor that could spoil the party in the gold market is that the world's central banks are sitting on large reserves of gold. Several central banks, including the German Bundesbank, have indicated a desire to sell some of their bullion when an agreement signed in Washington in late 1999 to limit gold sales expires in 2004. But a new pact is expected to be forged, and the central banks have said that gold remains an important element of the international monetary system. High gold prices also depress physical demand for the precious metal. "We've seen very clearly this year that as soon as prices go up physical demand goes through the floor and as soon as the price goes up scrap supply goes through the roof," said SG Securities analyst Stephen Briggs. Copyright 2002 Agence France Presse