Gold prices hit a record high in India on Wednesday as global prices surged on war fears, bringing professional bullion trade in the country to a standstill and drawing queues of sellers at jewellery shops.

Gold prices in India, the world's largest consumer, opened at the highest-ever level of Rs 70,350 for a bar of 116.64 grams, tracking global prices. It was traded at around Rs 65,000 a month ago.

Gold was being sold in the retail market at around Rs 6,100 per ten grams.

"The entire trade, except the scrap business, has come to a standstill today as everyone is watching the moves by the United States," said Nayan Pansare, a senior official of gold trading firm Inter Gold Ltd.

Narendra Singh Rathore, a gold trader based in Rajasthan, said imports remained almost suspended for the second straight week due to firm prices.

India imports more than two-thirds of its annual gold needs of 700-800 tonnes.

Spot gold hit $386.75 an ounce, a level not seen since early September 1996. Gold's recent rally has been sustained by fears of a looming war in Iraq as Washington prepares to make its case against Baghdad to the UN Security Council later on Wednesday.

Traders said gold prices could shoot up to $390-$400 an ounce if the United States attacks Iraq.

"But the prices may slip to about $365 in case war clouds disappear," Pansare said.

Traders said supply of scrap gold had sharply risen as many consumers were tempted by the high prices to sell their old jewellery.

"We are now buying seven to eight kg of gold every day compared with hardly two kg in normal days," said a Mumbai-based jeweller.

Jewellers were buying gold ornaments at about 10 per cent less than market prices, but sellers had no complaints because the returns were much higher than what they had spent, traders said.

Domestic gold prices were being quoted 3-4 per cent lower than import prices because of the increased scrap supplies, they said.