Gold breaches $700 an ounce as oil price rises on Iran fears

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The gold price broke through the $700-an-ounce barrier yesterday for the first time in more than 25 years, as mounting tension over Iran's nuclear programme triggered another spike in oil prices.

Gold hit a high of $700.90 in early New York trade, its highest since September 1980, while platinum climbed to a record.

It means gold has reached its highest level since the last major crisis over Iran, when activists held 52 Americans hostage from 1979 to 1981. In January 1980, gold set its record high above $850, about $2,180 on an inflation-adjusted basis.

"Gold will continue to be seen as a safe bet as international tension looks set to increase," James Moore, an analyst at, said.

The price was also given a fillip by speculation China could quadruple its gold reserves as a hedge against exchange rate movements. Talk was swirling that Chinese accounts were active in spot gold after a report on China's reserves.

"China should raise its gold reserves so those reserves can account for 3 per cent to 5 per cent of the foreign exchange reserves, instead of the current 1.3 per cent," China Gold quoted Liu Shanen, an expert at Beijing Gold Economy Development Research Centre, as telling a conference. This would see China quadruple its gold reserves to 2,500 tonnes from 600 tonnes.

Traders have bought gold as the dollar has fallen. The dollar slid on forecasts the US Federal Reserve would give a clear signal tonight that it plans to take a break from its monetary tightening, which could narrow the gap between US and European rates. The euro gained 0.5 per cent on the day to $1.2769, moving closer to the one-year high of $1.2787 reached on Monday.

Meanwhile, oil leapt more than a dollar to above $71 a barrel as a solution to Iran's nuclear stand-off with the West remained elusive and Saudi Arabia warned prices would stay high for the rest of the decade.

Ali al-Naimi, the Saudi oil minister, said the world faced a shortage of refining capacity. "I believe oil prices during this decade will hold steady. The problem of the availability of suitable refining capacity, compatible with the new, rigorous and ever-changing regulations in some consumer countries, will continue for many years to come."

London Brent rose $1.49 to $71.70 a barrel, while US light crude gained $1.53 to $71.30, just off a session high of $71.40.