Reuters

Reuters
London

Gold took a breather on Thursday from its sprint to 2-1/2 year
price highs but violence in the Middle East and fears of an
Indian-Pakistan war were expected to keep the precious metal
bubbling over, traders said.

Talk of war between nuclear-armed India and Pakistan over
their disputed Kashmir border, fresh violence in Israel and fears
of a repeat terror attack in the United States has prompted
investors to pile into the ultimate safe-haven asset.

Gold shot to US$319.60 a troy ounce on Wednesday, its firmest
level since October 1999 to cap a winning streak for the metal
which has gained 15 percent since the start of this year.

But by 1011 GMT (0511 p.m. Jakarta time), gold was quoted at
$316.00/316.50 an ounce, down from its closing level of
$318.10/318.60 in New York on Wednesday.

"Everyone got a bit gung-ho about gold's rally. It needs to
come back to $315 and $312 and then re-assess it after failing
$320 yesterday," said Simon Weeks, bullion director at London's
ScotiaMocatta.

India's prime minister meets his security advisers in disputed
Kashmir on Thursday after telling troops confronting Pakistani
forces to prepare for action after a week of cross-border firing.

Atal Behari Vajpayee, on a three-day visit to the state at the
root of two of the three wars between the South Asian neighbors,
has sent extra troops to India's border with Pakistan and extra
warships to the Arabian Sea off its coast.

Further bombings in Israel and U.S. Vice President Dick
Cheney's warning on Sunday that a repeat terror attack on the
U.S. mainland was a near certainty also supported gold prices.

Suspected Palestinian militants tried to set ablaze a major
Israeli fuel pumping depot near Tel Aviv on Thursday, hours after
a suicide bomber struck in a public garden.

Gold broke through the key $300 mark at the end of March after
Israeli troops launched its military into the West Bank after a
series of Palestinian suicide attacks in Israel.

Despite profit-taking, gold demand looked strong and a retreat
below $310 unlikely in the short-term , traders said.

"A huge wave of profit-taking seens unlikely...We are now
looking to consolidate between the $315 support and $320
resistance," said Andy Maag, metals analyst at UBS Warburg.

Standard Bank in London took a similar line: "With the long
weekend approaching gold should stay well supported on any dip
with buying interest evident around $316 and $313," it said.

The dollar's performance against major currencies, stock
market activity and gold miners' policy on forward sales were all
seen as instrumental in gold's future price direction.

Other precious metals were lower in line with gold.

Silver was indicated at $4.76/4.78 against New York close at
$4.82/4.84, tracking gold's weakness.

Platinum was quoted at $536.00/541.00 an ounce versus its New
York close at $542.00/549.00 and palladium at $352.00/357.00 from
its previous close of $354.00/369.00 in New York.