Gold and Oil Soar on Gulf War Fears

December 19, 2002

With just hours to go before a US statement on Iraq that could bring war closer, the price of oil and gold has shot up.

The fear is that the US will declare that it deems Iraq to have breached the latest UN Security Council resolution on weapons of mass destruction.

Gold is on fire - Andy Maag, Metals analyst, UBS Warburg

The growing risk of war in the Middle East has conspired with the continuing strike-driven shutdown of Venezuela's crude oil production to drive oil prices to a three-month high.

Gold, meanwhile, has assumed its traditional role as a safe haven in uncertain times, with its price hitting levels not seen in almost six years.

Jitters

The worries about what will come out of the UN weapons inspectors' news conference later, and one after that with US Secretary of State Colin Powell, dissolved early stock market gains in Europe.

Some oil stocks bucked the trend, though, with France's TotalFinaElf up 1%.

Wednesday's hints from the Bush administration that it considers Iraq to be in violation of Resolution 1441 come as the US troop buildup in friendly Gulf states accelerates.

A week after oil cartel Opec agreed production cuts, and with the Venezuela strike showing no signs of abating, the price of Brent crude for February delivery rose as much as a dollar to an 11-week high of $29 a barrel late on Wednesday.

Although the gains abated slightly at the close, by Thursday lunchtime the price was back up to $28.98.

New York's price for light sweet crude to be delivered in January, meanwhile, gained 34 cents a barrel on Wednesday to $30.44.

Tradition

Gold markets were booming too, as the combination of falling stock markets, the weakening dollar and political uncertainty came together to focus investors on more old-fashioned stores of value.

"Gold is on fire," said Andy Maag, metals analyst at UBS Warburg.

"It's all about fears and liquidity... there is enormous appetite out there as alternative investment opportunities are waning."

The bullion price "fix" on the London Metal Exchange for Thursday morning was $345.75 a troy ounce, up from $338 the day before.

In Asia earlier in the day, the spot price for gold had leapt to as much as $353.75 an ounce before falling back.

http://news.bbc.co.uk/2/hi/business/2590619.stm