Thousands of troops from the 4th Infantry Division, based in Saddam's hometown of Tikrit, launched a new operation to root out resistance in hostile Sunni Muslim territory to the north of Baghdad. Operation Ivy Needle began on Tuesday with the capture of 24 people in raids targeting a criminal gang.

According to new figures issued by the Pentagon, 62 US soldiers have been killed in action in Iraq since Bush declared major combat over on May 1, and a further 78 have died from accidents, illness or non-hostile incidents.

On Tuesday, the postwar US death toll in Iraq exceeded 138 -- the number of US soldiers who died during the invasion and occupation of Iraq in March and April.

But Bush said efforts to secure Iraq would continue.

"Retreat in the face of terror would only invite further and bolder attacks. There will be no retreat," he said in a speech amid growing criticism in the United States of his Iraq policy as he presses his case for re-election next year.

"Terrorists are gathering in Iraq to undermine the advance of freedom. And the more progress we make in Iraq, the more desperate the terrorists will become."

The US 4th Infantry Division has staged repeated raids hunting Saddam and his top lieutenants, and has mounted several large-scale operations to try to snuff out guerrilla attacks in the fugitive dictator's strongholds around Tikrit.

But Saddam himself remains on the run, despite a $25 million price on his head. Senior US officers based in one of his former palaces in Tikrit say they believe he is in disguise and moving every few hours.

Last week, Washington announced the capture of two of Saddam's most senior aides -- "Chemical Ali" Hassan al-Majid and former Vice President Taha Yassin Ramadan.

Officers in Tikrit said Operation Ivy Needle, which will last several days and involve thousands of troops backed by tanks and helicopters, aimed to crack down on resistance through "surgical strikes" in remote areas.

Washington blames Saddam loyalists and foreign Muslim militants for attacks on its forces, and says supporters of the former leader and groups linked to al Qaeda are also the prime suspects for last week's bomb attack on the United Nations headquarters in Baghdad, which killed at least 23.

The attack on the UN has sparked fresh debate on whether the world body should have a strengthened mandate in Iraq.

Funding the occupation and reconstruction of Iraq is another concern. US authorities in Iraq have all but exhausted nearly $1 billion in seized assets used to pay Iraqi civil servants, and some administration and congressional officials say extra money may be needed sooner than expected.