(Recasts with president's speech at rally)

TEHRAN, May 24 (Reuters) - Iran's nuclear work is close to reaching its "peak", President Mahmoud Ahmadinejad said on Thursday, vowing the Islamic state would never give up atom activities the West suspects are aimed at making bombs.

He voiced fresh defiance a day after U.N. monitors said Iran was making substantial advances in uranium enrichment, ignoring world demands and opening the way to harsher sanctions against Tehran over its disputed nuclear programme.

"With God's help the path to completely enjoying all nuclear capacity is near its end and we are close to the peak," Ahmadinejad said at a rally in the central town of Isfahan.

"The Iranian nation today has industrial nuclear technology and ... it will never retreat even one step from this path," he told the cheering crowd in a speech broadcast on television.

Western powers suspect Iran is seeking to develop nuclear weapons, but Tehran says its efforts are only aimed at generating electricity so that it can export more oil and gas.

Six world powers stand behind U.N. Security Council resolutions demanding Iran suspend all nuclear fuel work in exchange for negotiations on trade incentives, with the threat of escalating sanctions if Tehran keeps refusing.

Nine U.S. warships sailed into the Gulf on Wednesday for manoeuvres to display impatience with Tehran, which Washington accuses of backing insurgents in Iraq. Iran denies the charge.

Ahmadinejad, known for his fiery anti-Western rhetoric, said Iran's enemies wanted to prevent its nuclear progress with "threats, psychological warfare, political pressure and the issuing of resolutions."

But, he added, "you saw that against the firm will ... of our nation you fell and you experienced the bitter taste of failure again and again."

In an earlier speech on Thursday, he said the country was close to achieving its "ultimate goals."

Mohamed ElBaradei, head of the U.N.'s nuclear watchdog, said on Thursday that Iran was probably three to eight years away from producing a nuclear bomb if it wanted and appealed for Iran and the West to resume talks on a compromise as soon as possible.

Iranian officials have repeatedly ruled out freezing uranium enrichment, which can be used to make nuclear power fuel or provide material for weapons.

"They (Iran's enemies) should know that the path is irreversible," Ahmadinejad said, warning the West against any "suicidal" acts against Iran.

"We will soon witness greater and greater victories for the Iranian nation on the international scene," he said.

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