Traders in India, the world's largest gold consumer, were stocking up on the precious metal on Monday amid fears that a US-led war with Iraq was imminent and could push bullion prices higher, dealers said.

"Normally, gold imports tumble with a significant rise in prices," said a bullion trader based in Mumbai. "But we witnessed a different scene today as many traders thought prices will soon surge."

Spot gold  touched $345 an ounce in Asian trading on Monday, higher than New York's last quoted $336.10/336.90 and up from last week's three-month traded low of $331.30.

The safe-haven metal spiked after Washington gave the United Nations until the close of Monday to find a diplomatic end to the Iraq crisis before the United States moved to a war footing.

"Traders are cautiously buying as they know that prices will crash if there is no war. But at the same time, they want to have some quantity in hand to run the business for about a week," a trader said.

Traders said world gold prices could surge to $360 an ounce in the event of the war, and could cross even $400 if it continued for more than a few weeks.

Traders in Chennai bought about 100 kg of gold from banks on Monday, said Ranjit Rathod, a bullion dealer in Tamil Nadu. The city on average imports 150 kg a day.