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Gold Gains to Four-Month High in London on Flight to Safety

By Stuart Wallace and Marianne Stigset

July 15 (Bloomberg) -- Gold rose to the highest in almost four months in London as political tension in the Middle East and financial concerns in the U.S. increased investor demand for the metal as a haven.

Gold gained for a fifth straight day after U.S. financial shares fell to the lowest in a decade yesterday on speculation a shortage of capital will cause some banks to collapse. Iran, OPEC's second-biggest producer, is defying United Nations efforts to halt its nuclear program.

``Heightened tensions towards Iran and fears of a meltdown in U.S. financial markets triggered further flight-to-safety demand,'' James Moore, an analyst at TheBullionDesk.com in London, wrote in a report today. Gold is ``on course to challenge resistance around $982-90 an ounce,'' Moore wrote, without giving a timeframe.

Gold for immediate delivery rose $8.91, or 0.9 percent, to $981.51 an ounce as of 11:04 a.m. in London. It earlier reached $982.50, the highest since March 19. Futures for August delivery rose $9.10, or 0.9 percent, to $982.80 on the Comex division of the New York Mercantile Exchange.

The dollar fell below $1.60 against the euro for the first time in almost three months and stocks slumped in Europe and Asia on speculation the Federal Reserve and the U.S. Treasury will say credit-market losses are weighing on economic growth. Crude oil rose above $146 a barrel.

Oil, Dollar, Stocks

``With the downturn in equity markets a lot of people are diversifying into gold,'' said Mark O'Byrne, managing director of brokerage Gold and Silver Investments Ltd. in Dublin. ``Dollar weakness, oil strength and also the safe-haven thing'' are driving demand for the metal, he said.

O'Byrne says gold may hit $1,000 an ounce this week.

Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by gold, advanced to a record 705.9 metric tons on July 10. Holdings in the fund rose from 659.91 tons, according to data posted on the company's Web site July 11.

Gold rose to $981.75 an ounce in the morning ``fixing'' in London from $968.00 at the previous afternoon fixing. The fixing is conducted by telephone twice a day: Deutsche Bank AG, HSBC Holdings Ltd., Bank of Nova Scotia, Societe Generale SA and Barclays Plc.

Among other metals for immediate delivery, platinum dropped $8.50, or 0.4 percent, to $2,013.50 an ounce. Palladium rose 75 cents, or 0.2 percent, to $452.50 an ounce and silver gained 26.25 cents, or 1.4 percent, to $19.3525 an ounce.

Platinum fell to $2,015 an ounce in the morning ``fixing'' in London from $2,017 at the previous afternoon fixing. Palladium declined to $450.00 an ounce, from $451.00.