Gold Rises to 25-Year High

This is a classic example of speculation rather than economics.

Bloomberg - Gold rose to a 25-year high in New York 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. Oil prices have surged to a record on concern exports from Iran, the world's fourth-largest producer, may be disrupted, stoking inflation.

``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.

Gold futures for June delivery rose $4, or 0.6 percent, to $680.50 an ounce at 9:31 a.m. on the Comex division of the New York Mercantile Exchange. Prices earlier reached $687, the highest since October 1980.

AngloGold Ashanti Ltd., the world's third-largest gold producer, 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, said he expects prices to rise further.

Barrick Gold Corp., the world's largest gold producer, has 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 a report.

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 countries 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.'' Gold may 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, he said

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 reached $70.70 a barrel today and has gained 38 percent in the past year. Oil climbed to $75.35 on April 21 and April 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.

``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.''