Gold Futures Exceed $680 as Iranian Nuclear Dispute Intensifies

May 5 (Bloomberg) -- Gold in New York reached a 25-year high, rising past $680 an ounce, as investors bought the precious metal as a haven and a hedge against inflation.

Iran, the world's fourth-largest oil supplier, yesterday rejected U.S.-led demands that it halt uranium enrichment. Crude prices have surged to a record on concern over disruption to Iranian oil supplies, raising fears of inflation and increasing the appeal of bullion as a hedge.

``It's the same story of Iran, inflation concerns and rising oil prices,'' Charles Dowsett, head of trading of precious metals at ABN Amro Holding NV, said by phone in Sydney.

Gold futures for June delivery rose as much as $6.00, or 0.9 percent, to $682.50 an ounce on the Comex division of the New York Mercantile Exchange in after-hours electronic trading. That's the highest price since gold futures touched $688.50 on Oct. 16, 1980. They traded at $678.80 at 11:55 a.m. Sydney time.

Crude oil in New York touched $75.35 a barrel on April 21 and 24, the highest since trading began in 1983, partly on concern over the Iranian dispute. Oil prices more than doubled in 1979 after a revolution in Iran cut the nation's oil exports.

Some investors buy gold to hedge against inflation, which erodes the value of fixed-income assets such as bonds. They also buy bullion as a haven against instability in financial markets caused by geopolitical tension.

The U.S., U.K. and France yesterday circulated a draft United Nations' resolution that demanded Iran ``suspend all enrichment-related and reprocessing activities, including research and development.'' The three have said Iran is developing nuclear weapons; Iran has denied the charge.

`Threats, Intimidation'

The draft resolution ``is extremely unhelpful and won't get anywhere,'' Iranian Ambassador Javad Zarif said. ``Iran does not respond to threats and intimidation.''

Barrick Gold Corp., the world's largest gold producer, yesterday also said it is cutting forward gold sales, which lock in prices, to take advantage of rising prices.

``This is a signal that the producers are still expecting higher prices,'' said Dowsett.

Gold for immediate delivery fell in Asia from a 25-year high as a chart traders use to predict price movements suggested bullion may decline today.

The 14-day relative strength index is above 70 for the fourth day for spot gold. Readings above 70 indicate prices may be poised to fall. The last time the index was at this level on April 19, prices fell 3.1 percent over the next three days.

``On all accounts, gold looks overbought at present,'' said Ron Cameron, a Sydney-based analyst at Ord Minnett Ltd. `We're currently in territory not even contemplated six months ago. The price seems to have momentum on its side.''

Gold for immediate delivery fell as much as $3.61, or 0.5 percent, to $676.09, and traded at $676.58 at 11:59 a.m. Sydney time. It reached $680.70 yesterday, the highest since Oct. 10 1980, when it had touched $685.25.