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Gold Rises to 25-Year High, Platinum at Record
May 10, 2006

May 10 (Bloomberg) -- Gold rose to a 25-year high and platinum reached a record as the standoff between Iran and the U.S. intensified, spurring investors to buy precious metals as a haven.

Iranian President Mahmoud Ahmadinejad today criticized Western nations for their stance on nuclear energy amid U.S. accusations that the Middle Eastern nation is enriching uranium to make bombs. Some investors buy precious metals as a store of value amid geopolitical turmoil. Gold touched a record $850 an ounce in January 1980 after the 1979 Iranian revolution cut oil exports. It's jumped 28 percent since Jan. 9, when Iran said it had resumed nuclear research.

``Gold's a safe haven; it's the currency with the greatest integrity because it doesn't have a central bank behind it,'' Rhona O'Connell, a consultant at London-based metals research firm GFMS Ltd, said in an interview.

Gold for immediate delivery in London rose as much as $3.69, or 0.5 percent, to $704.59 and traded at $703.75 at 10:57 a.m. local time. Bullion surpassed $700 yesterday for the first time since Sept. 24, 1980, a day after Iraq invaded Iran.

The U.K. and France, backed by the U.S., proposed a resolution to the United Nations Security Council on May 3 demanding Iran cease uranium enrichment, and said they would seek sanctions should the government in Tehran fail to comply.

``There's concern over what's happening with the Iranian situation,'' Jonathan Barratt, head of foreign exchange and precious metals at Tricom Futures Pty., said in Sydney. ``People are listening to the bullish news and its approaching fever pitch. There's no short positions on our books now.''

Rate Speculation

Gold also gained as the dollar declined to a one-year low against the euro, O'Connell said. The dollar fell on speculation the U.S. Federal Reserve will today signal a pause after an expected 16th straight interest-rate increase. A weaker dollar makes bullion more attractive as an alternative investment.

``The market is looking for alternatives to the dollar and diving into the metals,'' said Ron Cameron, a Sydney-based analyst at Ord Minnett Ltd. ``The dollar is still going to come under more pressure.''

Gold mine production may fall after Western Areas Ltd. said today its South Deep mine, Africa's largest gold deposit, may halve output for as long as a year because of damage to the main shaft. The mine produced 53,973 ounces in the first quarter.

Platinum for immediate delivery rose $24.75, or 2 percent, to $1,261.50 an ounce, after earlier increasing to a record $1,267.75.

Prices have climbed 44 percent in the past 12 months as investors bought the metal used in jewelry and car catalysts on speculation there will be production shortfall.

`Risk Premium'

Bullion has surged as oil reached a record last month, partly due to the Iran dispute, which has also sparked concern supplies of oil from the Middle Eastern nation may be disrupted. The U.S. government said yesterday a letter from Iran's Ahmadinejad hasn't reduced its determination to halt the world's fourth-largest oil supplier from enriching uranium.

``The dispute is creating a fear and that risk premium is being priced in'' for oil and gold, said Andrew Harrington, a Sydney-based industry analyst at Australia & New Zealand Banking Group Ltd. ``The heightened sense of uncertainty makes people want to hold gold.''

Crude oil for June delivery traded at $70.65 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Prices are up 36 percent from a year ago.

Some of China's economists are also urging the country to quadruple its gold reserves to 2,500 metric tons from 600 tons, Reuters said yesterday, citing an official industry newspaper.

``This is probably what caused the spike,'' in the gold market, O'Connell said. ``Whether it's true or not is irrelevant, it's all about perception.''

Commodity Stocks

Today's gains on the metals markets also boosted commodity stocks. Shares of Impala Platinum Holdings Ltd., the world's second-largest platinum producer, surged as much as 6.1 percent to a record 1,365 rand in Johannesburg. Shares of Anglo Platinum Ltd., the world's largest, rose as much as 6.6 percent to a record 723 rand.

``There's a great deal of activity going on here,'' John Meyer, a mining analyst with Numis Securities in London, said in an interview. ``People are throwing in orders'' to buy mining shares.

``Commodity stocks are where investors can put their money with confidence as metal and oil prices will probably stay high,'' said Junichi Misawa, who oversees $665 million at STB Asset Management Co. in Tokyo.

To contact the reporter on this story:
Tan Hwee Ann in Melbourne at  hatan@bloomberg.net;
Danielle Rossingh in London  drossingh@bloomberg.net.

Original Text