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Fri, Dec 20, 2002 - Page 12 News List

Crude oil and gold prices skyrocket

WAR NERVES The continued possibility of a US-led invasion of Iraq coupled with an ongoing strike in Venezuela is creating turbulence in global financial markets

REUTERS , SINGAPORE

Gold soared to its highest level in almost six years yesterday and oil hovered near three-month peaks as Washington deepened war fears by preparing to declare Iraq in violation of a UN disarmament resolution.

Stocks and the dollar struggled and US Treasuries held recent gains after US officials said Secretary of State Colin Powell would issue Washington's response on Thursday to Iraq's 12,000-page arms disclosure.

The US officials said the Iraqi report had failed to disclose suspected chemical, biological and nuclear weapons programs as required, though they stressed that would not be an immediate trigger for war.

But fears a conflict was nearer sent gold above US$350 an ounce for the first time in almost six years as speculators and investors continued to build a "war premium" into the price of bullion

The precious metal, a traditional sanctuary from financial market turbulence, rose as high as US$353.75 an ounce, its highest since March 13, 1997.

Profit-taking pulled it back to near the US$350 mark, well up from New York's close of around US$342 and taking its gain this year to some 25 percent.

"The war factor is driving up gold, there's no doubt," said Commonwealth Bank of Australia commodities strategist David Thurtell.

Oil was also on the march as the risk of military action against Iraq underlined threats to world oil supplies. Crude oil futures were up US$0.38 from the New York close at US$30.82 a barrel yesterday, after surging to US$31.25 on Wednesday, a three-month peak and just shy of a 22-month high.

"All this talk of war has spooked a lot of people, especially with the White House expected to say Iraq's arms dossier contains omissions," said a New York oil broker who requested anonymity.

A prelude to war?

* US officials said the Iraqi report had failed to disclose suspected chemical, biological and nuclear weapons programs.

* Fears a conflict sent gold above US$350 an ounce for the first time in six years.

* Crude oil futures closed at US$30.82 a barrel yesterday.


The Iraqi standoff compounded worries over a general strike in Venezuela, the world's fifth-largest oil exporter, which has helped drive the price of crude up more than 20 percent in the last month.

The war fears at one point sent Tokyo's Nikkei stock average below a 19-year closing low hit last month, but the market closed higher on gains in bank stocks.

The Nikkei closed up 0.5 percent at 8,387.57 after falling as low as 8,256.52.

Some Asian airline stocks dropped on the rise in oil prices, with All Nippon Airways Co Ltd falling 3.4 percent to a multi-decade low in Tokyo. China Southern Airlines and Thai Airways also fell elsewhere in Asia.

Outside Japan, Asian stock markets were little changed in light end-of-year trade, supported by gains in banks, gold and oil stocks.

Benchmarks closed up 0.7 percent in South Korea, 0.3 percent in Taiwan and 0.1 percent in Australia By midday, Hong Kong was down 0.7 percent and Singapore was flat.

"Investor sentiment is still rather weak and there is a tendency to remain bearish due to geopolitical concerns, rising oil prices and a weak US dollar," said Louis Wong, director at Phillips Securities in Hong Kong.

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