Gold Rises To 25-Year High As Standoff With Iran Spurs Buying

Gold Rises to 25-Year High as Standoff With Iran Spurs Buying

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May 5 (Bloomberg) -- Gold rose to a 25-year high in London as increased tension between Iran and the U.S. spurred investors to buy the precious metal as a haven and a hedge against inflation.

The U.S., U.K. and France are trying to get support in the United Nations Security Council for a resolution demanding Iran quit enriching uranium. Crude oil prices have surged to a record on concern over disruption to Iranian oil supplies, the world's fourth-largest, stoking inflationary pressure and increasing the appeal of bullion as a hedge. Bullion touched $684.90 today, the highest since October 1980.

"Gold may rise to $1,000 before June should the situation in Iran intensify," said Bernard Sin, chief trader at Geneva- based MKS Finance, a precious-metals trading and refining company, in an interview.

Gold for immediate delivery in London rose as much as $5.20, or 0.8 percent, to $684.90 an ounce. It traded at $682.37 as of 12:02 p.m. local time. The metal is headed for a weekly gain of 4.2 percent, its eighth consecutive weekly advance.

Bullion also gained as AngloGold Ashanti Ltd., the world's third-largest gold producer, today said the gold market is "set for a sustained positive cycle." The company's quarterly loss narrowed as it benefited from the higher gold price.

Bernard Swanepoel, chief executive officer of Harmony Gold Mining Co., Africa's third-largest gold producer, today said he expects gold prices to rise further.

Barrick Gold Corp., the world's largest gold producer, yesterday said it's cutting forward gold sales, which lock in prices, to take advantage of rising prices.

Oil Shipments
"This is clear evidence of producers' positive outlook about the gold price," John Meyer, an analyst at London-based Numis Securities, said in an e-mailed report today.

Iran would probably retaliate for any military strike against its nuclear facilities by trying to choke off oil shipments through the Strait of Hormuz, military planners said.

The U.S., U.K. and France yesterday circulated a draft UN resolution that demanded Iran "suspend all enrichment-related and reprocessing activities, including research and development." The three have said Iran is developing nuclear weapons, a charge Iran has denied.

The draft resolution "is extremely unhelpful and won't get anywhere," Iranian Ambassador Javad Zarif said. "Iran does not respond to threats and intimidation."

"It's the same story of Iran, inflation concerns and rising oil prices," said Charles Dowsett, head of trading of precious metals at ABN Amro Holding NV in Sydney.

Stock Crash
Marc Faber, author of a newsletter called The Gloom, Boom & Doom Report, yesterday said that gold is becoming the "global currency of choice." He forecast bullion to surge to $6,000 an ounce in the next decade, and possibly to as much as $10,000 depending on U.S. monetary policy and the level of the Dow Jones Industrial Average at that time.

Faber told investors to bail out of U.S. stocks a week before the 1987 Black Monday crash.

Some investors buy gold to hedge against inflation, which erodes the value of fixed-income assets such as bonds. They also buy bullion as a haven against instability in financial markets caused by geopolitical tension.

Crude oil in New York traded at $70.60 a barrel, having risen almost 39 percent in the past year. It touched $75.35 on April 21 and 24, the highest since trading began in 1983, partly on concern over the Iranian dispute. Oil more than doubled in 1979 after a revolution in Iran cut the nation's oil exports.

UBS AG raised its forecasts for gold on April 28, saying bullion will average $750 an ounce in 2007, up from a previous prediction of $600.

"We're currently in territory not even contemplated six months ago," said Ron Cameron, a Sydney-based analyst at Ord Minnett Ltd. "The price seems to have momentum on its side."

Among other precious metals for immediate delivery in London, silver gained 4 cents, or 0.3 percent, to $14.02 an ounce. Platinum rose $6, or 0.5 percent, to $1,176.50 while palladium climbed $3, or 0.8 percent, to $380.50.