NEW YORK, Dec 21: Gold retreated Friday on profit-taking before the year-end holidays, but traders refused to rule out further safe-haven gains for the metal as the United States pressured Iraq over weapons of mass destruction.

Steadier US financial markets gave speculators a pretext to cash in on gold’s runaway rise to near six-year highs on Thursday, expecting liquidity to dry up during Christmas week, when many traders will be out of the market.

February gold ended down $5.50 at $341.00 an ounce, trading from $348.90 to $339. Early Thursday morning the contract topped at $355.70, the highest since February 1997.

The stock market is up. That’s got to be a bit of a problem, said a commodity broker.

Forget about the day-to-day stuff, he continued. A week ago yesterday we broke through one of the most important technical levels in years, probably, for gold. This is the beginning of a bull market, it appears.

A falling dollar, jittery stock markets and surging oil prices, along with geopolitical uncertainty, sent investors running for safe havens like gold, US Treasuries and the Swiss franc.

But the dollar steadied above the week’s three-year lows against the euro and the Dow Jones industrial average was up 145 points Friday, taking bullion off the boil as investors calmed down.

Commodity funds, mutual funds and small investors have competed tooth and nail for gold since the breakout above $330 an ounce last Thursday. The market has not been this overbought in years.

According to CFTC Commitments of Traders data released late Friday, speculators increased their net long position to 55,200 (100-ounce) gold contracts as of Tuesday, from 51,359 contracts the previous week. But they kept buying in subsequent days.

At its highs, gold was up 12 per cent for December and about 28 per cent for 2002. Though momentum is waning, it might not take much to get it going up again, especially after Washington on Thursday all but started the war clock ticking by declaring Iraq in “material breach” of a United Nations disarmament resolution.

You’ve got an interesting market because it’s year-end and a lot of people are trying to wind down. But you’ve got the most exciting markets we’ve seen in a while, said James Pogoda, a vice president of precious metals at Mitsubishi International Corp.

I guess it will still be event-driven, with Iraq and the other stuff, he said.

The spot gold price drifted back to $340.35/341.05 an ounce, from $346.00/346.75 at the New York close on Thursday. The afternoon fix was $341.60.

COMEX March silver, which has tracked gold’s ups and downs, settled down 9.3 cents at $4.632 an ounce, in a $4.73-$4.605 range. Spot silver was at $4.62/64, off from $4.70/72 late Thursday. The fix was $4.665.

NYMEX January platinum fell $8.90 to $586.50 an ounce. Spot platinum closed at $582/587.

March palladium fell $9.90 to settle at $229.70, hitting a contract low at $226. Spot palladium was last at $224/230.

Dealers expect palladium to keep falling as industrial demand evaporates. Automakers, who use palladium in catalytic converters, have been looking for cheaper, easier-to-source alternatives.—Reuters