Gold price poised to challenge highs:
LONDON, Sept 22 - Gold prices jumped in Europe on Monday after the seven top world economies called for flexible currency regimes and on expectations that central banks will restrain the selling of bullion stored in their vaults.
In Asia, the gold market was just a whisker away from the 6-1/2 year high scored on February 5 at $388.50 an ounce as the dollar weakened and speculators -- already enamoured of the metal's safe-haven appeal -- saw their buying power strengthened.
The buying spree continued in Europe, punctuated by bouts of speculative selling to take profits, and then investment funds took up the baton again when New York opened.
"If the dollar now goes through a big weakening phase they (funds) will be quite happy to sit there and watch gold tick higher," John Reade of UBS Investment Bank told Reuters.
Investors saw the Group of Seven (G7) statement calling for flexible currency regimes as being aimed at countries such as Japan, where authorities have been intervening to stop a yen rise considered bad for exports, but the move had broad consequences for the dollar.
The call from the G7 led to the Japanese yen rising against the dollar, pushing the dollar down against the euro and making any dollar price relatively cheaper for a euro-based investor.
The International Monetary Fund (IMF), meeting in Dubai at the weekend, held initial talks on renewing a central bank gold sales pact that expires next year amid expectations the amount of bullion up for sale will not rise dramatically from 400 tonnes a year.
"The comment that seems to have been taken on board is that there would be no fundamental break to the approach taken, which most people are assuming means largely status quo," said Kamal Naqvi, precious metals analyst with Macquarie Investment Bank.
Central banks worldwide hold more than 32,000 tonnes of gold, enough to feed world demand for about 12 years. The current central bank deal limits gold sales by 15 central banks to 400 tonnes a year until September 2004.
Gold closed in Europe at $384.20/384.70 a troy ounce compared with $381.60/382.30 at Friday's New York close. The euro was at $1.1477 after touching a high of $1.1495 earlier.
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