Gold, oil prices soar again on threat of war

biz.thestar.com.my BY KATHY FONG

GOLD and crude oil prices spiked up again but the US dollar lost strength in Asia yesterday as fears of an impending war loomed after the United States hardened its resolve to launch a military attack against Iraq.

The spot gold price was up US$5.60 at US$339.80 per ounce in late Asian trading after hitting a high of US$345.

The precious metal had fallen back to US$334.20 last Thursday on expectations of a delay in military action against Iraq, after peaking at a 6½ year high of US$388.50 on Feb 4 when investors flocked to the traditional safe haven.

Tokyo gold futures went limit-up yesterday morning after Wa- shington gave only 24 hours for the United Nations to find a diplomatic end to the Iraq crisis.

Crude oil prices also rose sharply on the threat of imminent war. The strong buying interest was fuelled by worries that military action in the Gulf would disrupt supplies from other oil producers in the Middle East, which account for about 40% of global crude exports.

In Asia trading, Brent crude was up US$1.25 to US$31.42 per barrel yesterday, while US light crude leapt US$1.26 to US$36.64.

US light crude had jumped to a 12-year peak of US$39.99 a barrel in February, only US$1.16 shy of the record high struck in October 1990 in the build-up to the first Gulf war.

However, Kuwait's acting oil minister Sheikh Ahmad al-Fahad al-Sabah said on Sunday that the country would try to keep its main northern oilfields, which produced about 400,000 barrels per day (bpd), running in the event of war.

Kuwait has already closed two small fields on the Iraqi border, Abdali and Ratqa, which have a combined production of 35,000 bpd. The country currently produces nearly 2.4 million bpd.

Venezuela, the world's fifth largest oil exporting country, has also assured that it could raise production should the Or- ganisation of Petroleum Exporting Countries (Opec) decide to pump more oil into the market in the event of war.

Opec, which controls 60% of world crude exports, pledged last week to provide adequate supplies if a war against Iraq makes the move necessary.

However, the expectation of an imminent war applied downward pressures on the US dollar as investors' reluctance to hold US assets resurfaced.

The yen was quoted at 117.79 to the US dollar yesterday compared with 118.23 last Friday in New York.

The euro rose to US$1.0791 from US$1.0739, while the Ausralian dollar strengthened to 60 US cent from 0.5947 US cent.

But the British pound continued to soften against the US dollar. The currency was quoted at US$1.5814 yesterday compared with US$1.5832 last Friday.

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