LONDON, Jan 27: Gold leapt to its highest level in six years on Monday as war jitters, a fragile dollar and falling stock markets stoked interest in the safe-haven metal.

Spot gold hit $372.55 an ounce in European trading, its firmest level since December 1996 and more than 30 per cent higher than this time last year.

“This week could easily see further gains for gold, with a possible test of $385,” James Moore of TheBullionDesk.com said. By 1635 GMT, spot gold was quoted at $370.40/371.20 an ounce, up from $369.10/369.90 an ounce at the New York close on Friday.

Chief UN weapons inspector Hans Blix said that Iraq had cooperated in opening sites for inspection but had fallen short in filling in the gaps in last month’s declaration of its weapons programmes.

“Iraq appears not to have come to genuine acceptance, not even today, of the disarmament that was demanded of it,” Blix told the UN Security Council in a keenly awaited update on the inspectors’ work. On the other hand, the dollar fell to the lowest level against the euro for almost four years, but later rebounded in volatile trading dominated by worries about a possible war in Iraq, ahead of a key report by UN arms inspectors.

The single European currency rose to 1.0905 dollars at one point, the highest level since March 1999.

But the euro later eased back to 1.0817 dollars, against 1.0822 late on Friday in New York. The dollar also bounced back to 118.96 yen from 117.76 on Friday.

The US currency initially tumbled as UN arms inspectors prepared to deliver a report to the UN Security Council later Monday on their two months of work hunting down alleged weapons of mass destruction in Iraq.

Amid signs of a split between the United States and other members of the UN Security Council such as France and Russia, traders were worried that the US administration might launch unilateral military action against Iraq.—Reuters/AFP