Oil prices and the dollar have steadied but gold has fallen from a six-year high, as the markets digested US Secretary of State Colin Powell claims about Iraqi weapons.

The US crude benchmark was down 10 cents at $33.83 per barrel at 0552 GMT, after gaining 40 cents in New York after Mr Powell's speech to the United Nations Security Council.

Freezing temperatures and hoarding in case there is a war, causing a sharp fall in US stocks of heating oil, also supported the price.

Colin Powell: Eased market uncertainty

Two-weeks ago crude hit a 26-month high of $35.20 per barrel.

The US dollar has remained unchanged, after edging up of four-year lows in New York following the speech, trading at 1.0783 against the euro at 0620 GMT from $1.0938 in London.

Immediately after the speech the Dow Jones index of 30 leading US shares briefly rallied, but then began a steady fall to end the day down 28 points, or 0.4%, at 7,985.

In New York, gold ended down $2.70 at $377.20 an ounce after the London price retreated from its highest level since September 1996, to close at $380.70 per ounce.

International support

While many traders believed Mr Powell's speech raised the likelihood of war against Iraq, there were signs that the US was receiving greater international support for its position.

"Comments by Powell, combined with a report from the European Union that they would back action against Iraq" were behind the dollar's rally, said Neil Parker, strategist at Royal Bank of Scotland.

The market is drawing a conclusion that war is not too far away, which is better than constant worrying about when it's going to be, or if it's going to be Jason James, global strategist at HSBC

Shares in London staged a late rally, with a firm response by US stocks helping the FTSE 100 index close up 2.5%.

"The market is drawing a conclusion that war is not too far away, which is better than constant worrying about when it's going to be, or if it's going to be," said Jason James, global strategist at HSBC in London.

"The market would prefer the certainty that the war is going ahead."

This morning we tried to hire a diamond-tipped drill but were told there was none available Ron Manners, chairman, Croesus Mining

Martin Dobson, head dealer at Nat West Stockbrokers, said: "The market is hoping the uncertainty is over."

In the US, Ed White, of Boston-based money manager Gannett Welsh & Kotler said Mr Powell's speech was "positive for the financial markets initially".

But he added: "If this war doesn't turn out to be quick, surgical and successful, the market will probably go the other way."

Safe haven

The price of gold has risen almost 9% this year, boosting in turn the price of shares in gold firms, and sparking a run on mining equipment.

"This morning we tried to hire a diamond-tipped drill but were told there was none available," said Ron Manners, chairman of Croesus Mining, Australia's third-ranking gold producer.

Analysts predicted that gold, seen as a safe investment haven, would hold onto recent gains.

"We expect upside pressure to persist for gold before any clarity on the prospects of war," said Ingrid Sternby at Barclays Capital.