Gold prices rose to a six-year high as US stocks dropped, increasing demand for the metal as an alternative investment. A weaker dollar made the dollar-priced metal cheaper for buyers using other currencies.
Gold prices have climbed 5.8 percent this year, extending a 25 percent rally last year. Increased concern that the US will attack Iraq to force disarmament helped prolong the rally by sparking demand for the metal as a haven. The Dow Jones Industrial Average fell for the sixth time in seven sessions, erasing earlier gains and leaving the US stock index down for the year.
"This is not just the speculators moving into gold; we're seeing new investment," said Dan Vaught, an analyst at AGEdwards & Sons Inc in St. Louis. "When people see the Dow down again after three years of consecutive drops, the bigger surprise would be if people didn't go into gold."
Gold for February delivery rose US$3.70, or 1 percent, to US$368.40 an ounce on the Comex division of the New York Mercantile Exchange, the highest closing price for a most-active contract since Dec. 31, 1996. Prices were up 3.3 percent for the week.
Gold prices might reach US$400 an ounce leading up to an attack of Iraq, with the prospect of a decline after the mission is completed, Vaught said.
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