Gold futures contracts trading on the Tokyo Commodity Exchange closed at 21-year highs on Wednesday tracking spot bullion nearly hitting $670/oz, and open interest jumped to 270,418 contracts, the exchange data showed.

The far forward December 2007 contract finished at Yen 2,624 ($21.33)/g on Wednesday, up Yen 15 from the previous closing. The contract has been trading above Yen 2,600/g this week, the highest price levels posted since September 1985. The spot bullion inching up this week on the firmer crude oil futures prices and the US dollar trading firmly above Yen 121 supported the contract prices at the 21-year highs, analysts said.

The positive momentum is strong, as the spot bullion is expected to hit $670/oz early London hours Wednesday and finish the US trade at around $672/oz, said Kaname Gokon, commodity strategist at Okato Shoji.

"I do not expect the dollar-yen rate to fluctuate much...spot gold at $672/oz would bring the TOCOM [December 2007 gold] up to Yen 2,640/g," Gokon predicted.

Analysts in Tokyo agreed that it was very difficult to estimate when the lower correction would set in, as the market has not seen contracts above Yen 2,600/g in 21 years. They also agreed that the TOCOM gold prices are wholly dependant on the spot gold levels. "Technical analysis of TOCOM numbers does not make sense now," one analyst exclaimed.

Naru Mori, strategist at OvalNext, said he saw the December 2007 gold climbing up to Yen 2,650/g before correcting lower. Meanwhile, spot gold would rise up to $675/oz. Other analysts said Yen 2,700/g and even Yen 2,800/g.

As for the support level, Gokon said: "In the spot gold world, prices could fluctuate $15/oz in an hour...the prices may slide to $655/oz." On February 9, when spot gold traded at $655/oz, the December 2007 gold traded at around Yen 2,590/g. The US dollar rate, that also fluctuate TOCOM contract values, traded at around Yen 121.30 on that day.

Meanwhile, TOCOM trade data showed that open interest for the gold futures increased Wednesday after posting declines for two straight days. Gold open interest stood at 270,418 contracts after Wednesday's trade, compared to 262,630 contracts at end of Tuesday.

Analysts said previously that the fall of open interest in Tuesday's trade indicated that there were liquidations and some market participants were nervous about the steep uptrend in the prices.