Gold consolidates losses in NY, complex ends mixed
04:13 PM ET 5/11/99
NEW YORK, May 11 (Reuters) - Gold ended New York slightly
higher, interrupting the shakeout since Friday, but consolidation
is expected to dissolve into selling again as the cloud of
central bank disposals still darkens the outlook, dealers said.
"There was a little bit of bank dealer buying -- probably
some short covering," said William O'Neill, director of futures
research at Merrill Lynch. "But then as the day progressed the
market eased into a mixed trading range."
"The daily fundamentals weren't particularly supportive," he
continued. "The dollar was up, the equity markets are up and oil
is way down."
COMEX June gold settled at $278.80, up 40 cents per ounce
from Monday and up 70 cents from its traded low, but well below
its $280.40 morning high.
Spot bullion was quoted late at $277.90/8.40, compared to the
late London fix at $279.45 and the previous New York close at
$277.80/8.30.
News on Friday that the UK Treasury planned to auction off
415 tonnes of its 715-tonne gold reserve -- diversifying its
portfolio into assets denominated in dollars, euros and yen --
sent bullion prices into a two-day nosedive.
By chopping $12.60 per ounce off the spot price (as of
Monday's $277.10 low), the gold plummet reversed a one-month
rally which peaked at $289.70 on Thursday, creating howls from
newly-confident bulls and generating all sorts of theories about
Britain's motivations.
Analysts said the Treasury might have been trying to sell
before a bid for eventual membership in European monetary union,
in which case its flexibility to act might be restricted by the
European Central Bank (ECB).
Analysts also speculated that the five 25-tonne auctions to
start in July and run bimonthly until March, were scheduled to
beat any potential future sales by the International Monetary
Fund (IMF) and the Swiss National Bank (SNB).
Either way, by advertising the upcoming sale, opting for
transparency over quiet disposals may have ensured that market
gives the Bank of England a bad deal on the price, they said.
"The Bank of England is supposed to be operating in the best
interests of Great Britain, not the gold market or some other
gold speculator," said Henry Bingham, president of Van Eck
Institutional Advisors. "So if they are going to sell it, they
should get the best price they can for it."
"Maybe they could have gone to the Bank of China and they
would have been glad to swap 400 tones of gold for whatever the
equivalent is of U.S. Treasury bills," he said.
Other precious metals were quiet. July silver fell 1.5 cents
to $5.415 per ounce, trading in a $5.38 to $5.48 range. Spot
bullion fetched $5.39/41, compared to the $5.3825 fix and
Monday's New York's close at $5.40/42.
"Given what's happened in gold, silver certainly is holding
in very well," O'Neill said. "Coin and jewelry demand is pretty
good for silver. The big thing about silver is it is not
threatened with all these potential official sales, whether it be
from the UK or the ECB or the Swiss National Bank or the IMF."
NYMEX July platinum ended at $355.10 per ounce, up 50 cents.
June palladium rose $4.00 per ounce to $333.00.
((--Alden Bentley, New York Commodity desk, 212 859 1641
alden.bentley@reuters.com))
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