Gold pares gain after brief rally, silver down
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LONDON, July 16 (Reuters) - Gold gained more than $2 on Friday after a major producer suspended a
mine project and a senior IMF official said the body might sell gold to other central banks, but prices
drifted off the day's peak in later trade, dealers said.
Gold gained $2.60 on Friday to a high of $256.40 a troy ounce compared to the New York close at
$253.80/$254.30. But prices drifted lower and it was last quoted at 254.40/$254.90.
Traders said comments by International Monetary Fund deputy managing director Alassane Ouattara lend
some support to gold.
Ouattare said in an interview with USA Today that gold sales to central banks rather than to the market
are one option for the IMF as it assesses how to pay for debt relief and loans to poor countries.
He said the IMF might try to work with European nations to limit their gold sales. This work could be
coordinated through the Bank for International Settlements.
"The aim is to protect the gold market so the sale will not have a major impact," Ouattara said.
The IMF's board discussed the issue last Friday, but made no decision on how to proceed with the sales,
which will need approval from a hostile U.S. Congress. Monetary sources said at the time that sales to
central banks might be one option.
The decision by Placer Dome Inc to suspend construction of the Las Cristinas gold mine in Venezuela,
due to low prices also lifted bullion prices.
"Obviously it is the Placer Dome announcement and also the IMF deputy managing director making the
comment that they may try and sell 10 percent of their gold to other central banks, rather than on the
international market," said N.M. Rothschild & Son treasury analyst Helen McCaffrey.
Placer Dome said the Las Cristinas project would be suspended and put on care and maintenance "due
to changed gold market conditions and lower prices which have created greater uncertainty about the
future."
Gold prices have fallen almost $35 a troy ounce since early May when the British government announced
it would reduce its gold reserves from 715 tonnes to 300.
Before the British gold sales, bullion prices were under pressure from Swiss plans for central bank gold
sales and IMF plans to sell around 300 tonnes from its gold reserves.
Dealers said gold moved lower in late European trade after the market absorbed the IMF news.
"Above the $256.00 area, the market becomes very nervous," one dealer said.
Silver was last quoted lower at $5.06/$5.08 a troy ounce, down from the previous New York close at
$5.09/$5.12.
Platinum was last quoted a dollar higher at $348.50/$350.50 compared to the previous $347.50/$349.50
New York close.
Palladium was last unchanged at $335.00/$340.00 |
