War fears keep shine on gold

news.ft.com By Adrienne Roberts and agencies Published: January 10 2003 18:40 | Last Updated: January 10 2003 18:40

Gold ended the week close to six-year highs after reaching a peak of $356.50 an ounce on Thursday.

The looming threat of war in Iraq, and a shaky US dollar, helped sustain buying interest in the metal.

The speculative net long position on New York's Comex was shown to have grown again. According to the latest CFTC Commitments of Traders figures, large speculators were net long 59,505 100-ounce contracts, the largest such position in almost seven years.

John Reade, analyst at UBS Warburg in London, suggested new participants might have been entering the gold market. "Since the size and durability of these flows are unknown and there are few obvious sellers of gold in evidence, then gold could hold these levels or even make further gains," he said.

He warned, however, that speculation-led rallies could end as quickly as they had started and that physical demand was "not supporting the gold price at the current levels".

Spot gold was $353.00 an ounce at London's afternoon fixing, compared with $344.50 an ounce the previous Friday.

The concerns about Iraq, as well as continued failure by Venezuela to resolve its strike, kept support under the crude oil market.

But concerns about a possible tightening in oil supplies receded as Opec signalled its willingness to step up production to compensate for loss of Venezuelan crude.

The cartel is scheduled to hold an emergency meeting on Sunday, with analysts expecting it to boost output by about 7 per cent.

On Friday, the International Energy Agency said it would consider releasing strategic oil reserves if a continued strike in Venezuela coincided with war in Iraq.

Late in London, IPE February Brent was $29.32 a barrel compared with a close of $30.77 a barrel the previous week.

By early afternoon in New York, Nymex February WTI was $31.67 a barrel compared with a close of $33.08 the previous week.