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Tue, Feb 18, 2003 - Page 12 News List

Gold price declines on expectation that war will be delayed


Gold prices fell on the expectation that a US-led war on Iraq may be delayed after the UN said it needs more time to determine whether Iraqi leader Saddam Hussein is developing weapons of mass destruction.

Gold for immediate delivery fell as much as US$10.30 an ounce, or 2.9 percent, to a seven-week low of US$341.25. It traded at US$346.35 at 3:39pm Tokyo time, extending to 11 percent its decline from a six-year high of US$389.05 reached on Feb. 6.

Hans Blix, the UN's chief weapons inspector, said last week Iraq has increased its cooperation. France and Germany may put pressure on Britain at a European Union Summit today to give Blix's team more time and temper support for a US-led strike, following demonstrations in London by more than 750,000 antiwar protesters at the weekend.

"The war premium is coming out of gold," said Martin Mayne, a gold trader at NM Rothschild & Sons (Australia) Ltd in Sydney. "With the Blix report, some people may think there's a chance the weapons inspectors will be given more time."

That will delay a war or put it off indefinitely, he said.

The UN Security Council met Friday to hear reports from Blix and Mohamed ElBaradei, head of the International Atomic Energy Agency. They told the Security Council that they have found no weapons of mass destruction and that Iraq needed to cooperate more.

Gold for December delivery, the most active contract on the Tokyo Commodity Exchange, fell as much as Japanese Yen 60 -- the limit allowed by the exchange -- or 4.4 percent, to Japanese Yen 1,319 a gram. It traded at 1,329 yen a gram at 2:34pm.

"Gold has been trading on the back of the (war) uncertainty for so long," said Paul Lee, director of precious metals at Dresdner Kleinwort Wasserstein in Sydney. The 4.9 percent drop in spot gold prices last week "doesn't give people a lot of confidence to go out and buy gold."

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