TOKYO, Dec 19 (Reuters) - Tokyo gold futures ended a frantic
morning session at 5-1/2-year highs on Thursday as roiling war
clouds over Iraq triggered a storm of stop-loss buying.
All yen-based gold contracts <0#JAU:> except the new December
2003 benchmark finished limit-up at lifetime highs. Turnover was
a staggering 144,782 lots or 144.8 tonnes in the morning, well
over Wednesday's full-day tally of 107,336 lots.
Individual investors on the Tokyo Commodity Exchange took
their cue from spot bullion's surge to a new 5-1/2-year high as
jittery Australian investors piled money into safe-haven assets.
But dealers said Tokyo's fireworks were mainly ignited by
trading houses after an early burst of speculative buying on
TOCOM, with panic setting in as spot gold's rise above $347 an
ounce released a volly of stop-loss orders.
"Iraq is just an excuse," a trader with a big Japanese
trading house said. "I believe none of the traders would say they
didn't expect this. Everybody has been talking about military
action in Iraq for three or four months."
News that the United States was likely to declare Iraq in
violation of a U.N. disarmament resolution sent oil prices
soaring and added sparkle to gold's traditional image as
insurance against trouble.
The United States said on Wednesday it saw no sign Iraq would
comply with demands to disarm, while Washington's closest ally
Britain gave a clear signal it was preparing for war against
Baghdad next year.
Making its debut, the December contractfinished the
morning session at 1,360 yen per gram, a level not seen for
benchmark gold since May 9, 1997. Other months ended up by the
daily price limit of 40 yen.
Spot goldwas fetching $348.50/349.50 an ounce during
TOCOM's lunch break, up from $342.00/75 last quoted in New York.
Spurred by U.S. sabre-rattling against Iraq, a weak dollar
and strong oil prices, gold has risen nearly 25 percent this
year, making it one of the best-performing financial assets.
A weak greenback makes dollar-based bullion cheaper for
non-U.S. buyers. For Japanese investors, however, it makes
yen-based gold futures more expensive -- a consideration that
traders and analysts said was capping the Tokyo market.
"Still people are worried about a stronger yen," the trader
said. "If the United States starts attacking Iraq, the dollar
would collapse. So in yen terms, the price surge is rather
vulnerable."
The dollar weakened slightly in morning Asian trade, hit by
the bankruptcy of major U.S. financial service firm Conseco Incand U.S.-Iraq tensions.
It was fetching 121.06/11 yenat 0303 GMT, having
fallen as low as 120.69.
Gold dragged other precious metals futures higher in Tokyo.
Platinum contracts <0#JPL:> gained between 24 and 36 yen,
with the new December 2003 platinum contractending at
2,226 yen per gram.
Sister metal palladium <0#JPA:> rose 19 to 32 yen, while
silver <0#JSV:> tacked on 2.4 to 3.5 yen.
((Reporting by Tim Large, editing by Dale Hudson;
Reuters Messaging: [email protected];
+81-3-3432-7431; [email protected]))
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