LONDON, Feb 12: Gold jumped to its highest in seven months on Monday and is now targeting the psychological $700 level as geo-political worries and firmer oil prices attracted investors back to the market.

Spot gold rose as high as $668.20 an ounce in Asian trading, before losing momentum in Europe and dipping back to $663.20/663.90 by 1133 GMT, down from $666.50/667.20 late in New York.

Gold rose around 1 per cent in the US market on Friday after crude oil regained $60 a barrel for the first time since early January, spurring fund buying and short covering.

Firm oil prices raise gold's appeal as a hedge against inflation.

Investors were also putting their money into gold as tensions increase in the Middle East, with European Union foreign ministers agreeing sanctions on Iran to raise pressure over its nuclear programme.

We've seen a lot of risk aversion buying over the last couple of months. Many investors are concerned about the Middle East, probably more so than they have been for a while, said John Reade, metals analyst at UBS Investment Bank.

But a move back over $700 -- which would first need to see gold break through last July's peak of $676 -- would not be a one-way ride, traders and analysts said.

I am cautious here. We've seen a lot of money come in...at some stage I would expect a bit of a pullback Reade said.

Others said oil prices would need to see a sustained move over $60 to bring more money to gold. Oil futures fell more than 1 per cent to $59 a barrel after the oil ministers of Saudi Arabia and Qatar said Opec may well keep output unchanged at its March 15 meeting.

Gold hit a then 26-year high of $730 on May 12, 2006. Traders were waiting to see how the US would react later and the key Japanese TOCOM futures market, shut due to a public holiday on Monday, would also be closely watched on Tuesday.

We might see more of a reaction tomorrow when TOCOM reopens. Certainly, gold is technically looking strong. I see no reason why, at this present moment, we wouldn't want to head north again to test recent highs,” said Darren Heathcote of Investec Australia in Sydney.

Platinum was unchanged at $1,195/1,200 an ounce, having risen to $1,203 on Friday -- its highest since late November.—Reuters