Gold Surges Back - Eyes $400 -
Investors Shun Dollar

By Veronica Brown

LONDON (Reuters) - Gold is firmly back in vogue, with analysts expecting more price gains towards $400 an ounce as a sinking dollar and security worries highlight the metal's status as a safe-haven for investors.
"The general environment is still so uncertain -- it's one where really no one is going to sell gold in a big way," Kevin Crisp, analyst with Koch Metals, said.
Crisp said financial market worries over Iraq and a warning from U.S. Attorney General John Ashcroft on potential U.S. targets for al Qaeda were also fuelling the rise by gold -- now trading around $393 an ounce.
"If the market can keep up its current momentum then a test of $400 is perfectly possible," he added.
"There's some evidence that the funds have become involved again...and the dollar is a key driving force," Societe Generale economist Stephen Briggs said.
John Reade of UBS Warburg said: "Commodities are generally picking up again after the China and U.S. interest rate issues collapsed, so that's taken away a negative factor for gold."
He said investors might find better levels to buy the metal but suspected further gains lay ahead.
"I would say I'm two-thirds thinking of further upside."
Bullion has had a bumpy ride in the last couple of months, moving in and out of investors' affections as portfolio insurance.
It was flavour of the month in early April when fund buyers attacked 15-year peaks over $430.00 as dollar weakness pulled money into metals.
A weaker dollar makes dollar-priced bullion less expensive for non-U.S. investors.
Then came a brutal sell-off as sky-high speculative interest gave way amid a resurgence of the U.S. currency as stronger economic data pointed to decent growth and expectations of a dollar-boosting interest rate rise.
China -- a major metals consumer and producer -- also figured heavily as commodities plunged in late April when fund buyers were spooked by measures taken to calm down China's rampant economy, which grew by 9.1 percent last year.
Analysts were saying bullion faced a protracted stay in the doldrums as the market touched a seven-month low of $371 in early May, but now the impact of oil prices testing record highs has put the dollar firmly on the defensive and gold back on course for the highs.



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