By Zach Howard
NEW YORK, Sept 30 (Reuters) - Gold futures on the New York Mercantile Exchange charged to a one-week high Monday as sagging stock markets, a weak U.S. dollar and rumblings of a U.S. war with Iraq pushed investors into safe-haven assets.
But gold, at the moment guided by speculators rather than the market's industrial and commercial users, faltered well below June's 2-1/2 year peak over $330 an ounce amid a lack of momentum after a morning burst of fund buying.
"The gold market at this point is looking directly at the equities -- as the stock market falls, gold rallies," said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. "As stocks and the dollar were weak again, gold came up to test resistance, and failed. I don't think we're ready to get through the $330 level yet."
Gold for December delivery on the NYMEX's COMEX division ended at $325.20 an ounce, up $4.10 at its highest close since last Tuesday, after trading from $321.20 to $326.20.
With the Dow Jones industrial average tumbling 1.2 percent by mid-afternoon on top of Friday's 3.7 percent drop, gold raced higher from the open before later edging off its highs and into its recent $319.80-$325.50 trading range.
Analysts said however that speculators already held extensive long positions in COMEX gold, raising the risk of fund buying running out of steam and leading to liquidation in the short term.
"There may be some theoretical potential for some slight additional accumulation here, but it certainly does not outweigh the risk of heavy long liquidation," said Tim Evans, analyst at IFR Pegasus in New York.
Spot gold was last quoted at $323.95/4.35, above Friday's New York close at $319.70/0.20. Bullion dealers in London fixed the afternoon spot reference price at $323.70.
Major U.S. stock market gauges sagged toward their worst quarter since 1987 as investors fretted over discouraging economic data and corporate earnings worries.
And with tensions flaring between Iraq and the United States and a surging oil price adding to investor concern over the pace of economic recovery, the gold market became a refuge from the volatility of the broader markets.
Traders said a lower U.S. dollar, which makes bullion look more affordable to overseas investors in their own currencies, also buoyed yellow metal prices.
Final estimated COMEX volume hit 31,000 contracts, above Friday's count of 30,167 lots.
Open interest was down 2,304 lots at 181,763 contracts.
Technical analysts pegged resistance in spot gold at $328, followed by June's high of $331.50. The October 1999 peak of $339 was seen as the longer term obstacle.
December silver rose in gold's wake, closing 4.3 cents higher at $4.548 an ounce, ranging from $4.515-$4.585. Spot silver last traded at $4.53/54, up from $4.48/4.50 at Friday's close. Spot fixed at $4.5325 on Monday.
Turnover was about 7,000 contracts, versus 6,978 lots on Friday.
NYMEX benchmark January platinum advanced $3.50 to finish at $556.50 an ounce. Spot platinum was last at $560/565.
December palladium was up $3.90 to $319. Spot palladium was at $315.00/321.00.