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Price spikes keep gold rates firm

G. Chandrashekhar

MUMBAI, May 27

AMID thin volatile trading, gold prices last week witnessed wide fluctuations, but continued to remain firm. After reaching a 15-month high of $297.75 an ounce early in the week, prices eased back on lack of follow through buying. Later, the upwardly mob ile market faced a sharp downturn on account of conflicting reports. Gold closed at $276.25/oz on Friday (London PM fix), up 1.2 per cent week-on-week.

Statement from Russia that it was willing to sell gold and diamond from the country's reserves pulled the market down and helped players to sell long positions. However, the report was discounted. Russia is said to have some 388.7 tonnes of gold reserves .

The most recent Comex commitment of traders report showed that large speculators were net long gold future only by 121.1 tonnes as of May 22, the largest net long position since February 19, 1996. The threat of long liquidation is real, according to Mr K amal Naqvi, analyst with Macquarie Research Equities.

Commenting on the market outlook, the analyst said: ``Holding $275/oz or at least $270/oz is extremely important to the current more positive move towards gold (and gold equities). Holding around these levels, following a retracement, would confirm the m ore gradual improvement we were seeing in prices prior to the recent explosion in prices.''

However, the danger of prices falling back below $270/oz could not be ruled out, as had happened in the past when downtrend resumed after spikes, Mr Naqvi pointed out, adding that this time the outlook was more positive.

Silver witnessed some improvement. It managed to move up during the week, largely influenced by gold to gain 2.6 per cent to end at $4.57/oz (London AM fix) on Friday.

Both platinum and palladium were generally unmoved last week, despite report that Russian Government was working on scrapping export licenses and quotas - the major barrier to higher exports. Platinum ended the week at $616/oz (plus 0.5 per cent) and pal ladium $660/oz (plus 0.8 per cent).