Gold, oil rise as investors worry over war fallout

Gold and oil prices gained yesterday as investors fretted about the fallout of an imminent war against Iraq, but Tokyo stocks reversed earlier declines on hopes for government measures to prop up the market.

Many investors stood on the sidelines as the countdown began on Washington's ultimatum to Iraqi President Saddam Hussein. The battered dollar, which hit a three-week high against the euro earlier this week, ticked up.

"With war now likely, the only lingering source of uncertainty is whether it will be as short a conflict as is generally assumed," said Craig James, an analyst at Commonwealth Securities in Sydney.

Tokyo's Nikkei posted a 1.2 percent gain, closing at 8,051.04, after scraping out another 20-year low earlier in the day.

A report that a senior member of the ruling party would urge the government to support the market spurred a late buying spree.

Spot gold, a traditional safe haven, slipped from earlier highs but still was up from late New York levels. Traders expected a brief blip in bullion when the war starts but swift declines thereafter.

"If there is military action, we could see gold spike about US$5, but then we will see a big drop," said Richard Lim, director of UBS Warburg in Singapore.

Crude oil rose US$0.65 to US$32.32 a barrel, after sliding 9 percent on Tuesday.

Gold, which hit a six-year high of US$388 an ounce six weeks ago, traded at US$339 to US$340 an ounce at 0640 GMT, down from US$339.80 to US$340.80 in early Hong Kong trading but up from New York's last quoted level of US$337.50.

The dollar traded at ¥118.73 at 0640 GMT, compared with ¥118.83 in New York late on Tuesday.