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EDITIONS
 Thursday, 19 December, 2002, 21:54 GMT
Gold and oil soar on Gulf war fears
A man walking through a Kuwaiti oil refinery
Oil markets have many reasons to be jittery
Growing worries about a war with Iraq have triggered big rises in the price of oil and gold.

Pouring molten gold
Gold is on fire

Andy Maag
Metals analyst, UBS Warburg
The threat of military action, together with the continuing strike-driven shutdown of Venezuela's crude oil production, drove oil prices to a three-month high.

But oil prices fell back from their highs after Venezuela's Supreme Court ordered the restart of operations at the state oil firm PDVSA.

Gold, meanwhile, has assumed its traditional role as a safe haven in uncertain times, with its price hitting levels not seen in almost six years.

Jitters

Oil prices strengthened on Thursday after the chief United Nations weapons inspector Hans Blix said there was "little new information" in Iraq's weapons declaration to the UN.

And US Secretary of State Colin Powell stepped up the pressure by saying Iraq had "totally failed" to meet the requirements of a UN Security Council resolution with its declaration.

"We view a war with Iraq as virtually inevitable, but stress that nothing is likely to happen until the end of January at the earliest," said oil analyst Lawrence Eagles at brokers GNI.

Oil traders fear that any war in Iraq could disrupt oil supplies out of the Middle East.

But news of the Venezuela Supreme Court's ruling knocked prices back from their highs as hopes rose that oil supplies from the country might start again.

Oil output in Venezuela is now down to less than 300,000 barrels a day from 3.1m last month, following the 18-day-old industry shutdown.

On the New York Mercantile Exchange, US crude oil for January delivery was up 12 cents at $30.56 a barrel after hitting $31.10 at one point.

In London, February Brent crude prices fell back to $28.22 a barrel after earlier reaching $29.40.

Tradition

Gold markets were booming too, as the combination of falling stock markets, the weakening dollar and political uncertainty came together to focus investors on more old-fashioned stores of value.

"Gold is on fire," said Andy Maag, metals analyst at UBS Warburg.

"It's all about fears and liquidity... there is enormous appetite out there as alternative investment opportunities are waning."

The bullion price "fix" on the London Metal Exchange for Thursday afternoon was $345 a troy ounce, while in New York gold closed at $346, up from $342 late on Wednesday.

Earlier on Thursday in Asia, the spot price for gold had leapt to as much as $353.75 an ounce before falling back.

  WATCH/LISTEN
  ON THIS STORY
  John Driscoll, oil analyst at Petroleum Argus
"The Venezuelan strike... certainly has added a whole new dynamic to the oil markets"
See also:

19 Dec 02 | Americas
19 Dec 02 | Americas
19 Dec 02 | Business
16 Dec 02 | Business
15 Dec 02 | Business
12 Dec 02 | Business
04 Dec 02 | Middle East
04 Sep 02 | Middle East
22 May 02 | Business
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