Capital Gold Group Report: Gold Rises to Four-Month High in London on Flight to Safety

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 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 $10.68, or 1.1 percent, to $983.28 an ounce as of 12:46 p.m. in London. It earlier reached $985.16, the highest since March 17. Futures for August delivery rose $11.40, or 1.2 percent, to $985.10 on the Comex division of the New York Mercantile Exchange.

The dollar fell to a record low against the euro, bolstering gold's appeal as a hedge against further declines in the U.S. currency. Crude oil rose above $146 a barrel, increasing demand for gold as a hedge against inflation. Global stock markets fell.

``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. Gold may reach $1,000 an ounce this week, he said.

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.

Morning Fixing

Gold rose to $981.75 an ounce in the morning ``fixing'' in London, used by some mining companies to sell production, from $968.00 at the previous afternoon fixing.

Among other metals for immediate delivery, platinum dropped $3.50, or 0.2 percent, to $2,018.50 an ounce. Palladium rose 50 cents, or 0.1 percent, to $452.25 an ounce and silver gained 31.49 cents, or 1.7 percent, to $19.4049 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.

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