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Gold steady at $280 despite unexciting UK auction

G Chandrashekhar

MUMBAI, July 16

AFTER a disappointing UK auction, gold continued to test the $280 per ounce level in the London market. The yellow metal slipped to $279.25/oz bid immediately following the result but the prices soon recovered to end back above $280/oz. Gold traded in a narrow range for the rest of the week to end on July 14 at $280.25/oz, down 0.9 per cent from the previous week.

Earlier, gold began the week extremely quietly, hovering around $283-284/oz, ahead of the bi-monthly Bank of England auction. Traders were unwilling to hold open positions due to the unpredictable nature of the volatility that tends to follow the announc ement of the auction result, analysts said.

On Wednesday, the seventh UK 25-tonne gold auction was declared with a price of $279.75/oz, the largest discount so far to both AM fix and the spot price at the close of bidding. It was over-subscribed only 1.3 times, easily the lowest level so far.

The fact that gold was holding the level of $280/oz despite the weak UK auction result waas positive, but it was still too soon to suggest that a slide had been averted, said an analyst with Macquarie Bank Ltd. ``The market remains vulnerable'', he added .

Elsewhere, the market ignored information that the Swiss Central Bank had sold nearly seven tonnes of gold in the previous 10 days as part of its stated selling programme. The European Central Bank reserves fell by 30 tonnes as the forward sales of gold by the Austrian Central Bank, announced in February, finally arrived on the balance sheet.

Silver remained largely ignored during the week, although gold provided some direction but no excitement. The metal was range-bound between $4.90/oz bid and $5.00/oz. Official price on July 14 was $ 4.96/oz, down 0.5 per cent from the previous week.

Platinum and palladium were both stronger over the week, with the thin level of trading seen in regular bounces of $10-20/oz during intra-day trading. Meanwhile, small platinum producers in Russia have asked the Government to grant them quotas to export the metal directly from 2001 as they cannot sell domestically at fair prices, it is reported.