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Gold Dips as Traders See Delay for War

February 07, 2003|From Bloomberg News

Gold took its biggest tumble in three months Thursday amid speculation that the United States will need more time to win United Nations support for an attack against Iraq.

That triggered selling by some traders who had been riding the metal's recent powerful advance in anticipation that a conflict would begin soon, analysts said.

Near-term gold futures on the Commodity Exchange in New York sank $6.30 to $370.10 an ounce. The 1.7% drop was the largest since mid-November, when the metal's price was $319.

Investors and speculators have flocked to gold in recent months, restoring its role as a haven in times of international turmoil. Futures prices in New York closed at a six-year high of $379 an ounce Tuesday.

On Wednesday, Secretary of State Colin L. Powell presented the U.S. case against Iraq to the U.N. Security Council. France, Russia and China called for more weapons inspections, suggesting that an attack may not happen right away.

"The chance of something happening sooner is lessened now because France is defending its position, and Russia didn't turn around either, so we're back in limbo," said Jim Pogoda, a gold trader at Mitsubishi International Corp., a unit of Japan's largest trading company. "A lot of the buying that we saw in the gold market was based on something happening sooner rather than later."

Prices of other precious metals also pulled back Thursday. Near-term silver futures in New York lost 8.8 cents to $4.67 an ounce. Platinum futures slid $7 to $667.40 an ounce.

Many experts say gold could suffer a sharper pullback if war breaks out and the conflict quickly appears to go in favor of the United States and its allies.

Still, some analysts said gold may remain in a long-term up trend because more investors have soured on stocks, are wary of bonds and are looking for other assets to add to their portfolios.

"We like gold but only on down days," said Frederick Sears, chief investment officer at Boston-based Investors Capital Corp. He said the firm has 10% of its $120 million in assets in gold mining stocks, including Newmont Mining Corp.

Gold stocks were mostly lower Thursday as the metal fell. Newmont eased 12 cents to $28.60 and Goldcorp was off 7 cents to $12.34. Many of the stocks have stalled out in recent weeks even as the metal's price has continued to soar.

The rally in gold has meant a surge in business for the Commodity Exchange, a unit of the New York Mercantile Exchange.

The Merc said gold-futures trading Wednesday helped set a record for overnight electronic trading on the exchange.

A total of 25,529 gold futures contracts were traded in the electronic session that began at 3:15 p.m. EST Wednesday and ended at 8 a.m. Thursday. That was more than double the previous record of 12,273 set on Oct. 5, 1999, the exchange said in a statement.

For the exchange as a whole, the 47,308 futures contracts of various types traded overnight topped the previous record of 46,355 set on Sept. 17, 2002.

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