Gold trades at levels not seen in two decades
LONDON, May 26 (Reuters) - Gold traded at levels not seen since 1979 on Wednesday as market sentiment worsened and dealers said they expected bullion to move even lower.
Gold fixed at $269.50 a troy ounce in London at both the morning and afternoon fixes, its lowest since May 24, 1979. Spot gold moved in a $1.45 range in European trading and was last quoted at $269.30/$269.60.
Traders said gold suffered from producer sales on attempts to rally towards the $270.00 level while renewed negative sentiment also helped keep the lid on prices.
The market's main focus was the expiry in over-the-counter (OTC) options at 1430 GMT.
"We were sitting on $270.00 and it seems to have stopped there and I don't think there are too many large options positions at that strike," one dealer said.
Gold has fallen more than $20 since May 7, when Britain announced plans to sell more than half of its 715 tonnes of gold reserves, further depressing market sentiment affected by possible IMF and Swiss central bank gold sales.
"The trend is obviously down, people will be selling rallies," a dealer said.
Dealers said they have seen producers stepping in to sell metal as soon as the price edged closer to the $270.00 level which capped the gold price.
"If the market goes up, even into the low $270s the producers will be there selling," another dealer said.
Prices remained depressed despite good physical demand in Asia, dealers added.
Technical analysts said on Wednesday they saw gold drawing support from the $267.50 to $269.00 level which could mean a correction was on the horizon, given overbought indicators and despite recent falls to levels not seen in two decades.
"A lot of oscillators are showing oversold and it's looking like a correction," said Cliff Green, managing director of independent technical research group Trend Analysis.
Amanda Sells, a consultant in technical analysis for Warburg Dillon Read, said the shorter-term 7-day RSI was showing positive divergence, with the RSI peaks rising although prices were still declining. This often signals a rebound. "If we assume there is bounce potential at $269.50, then potential retracement targets would be at $275.5 and at $278/9 (where) short-term moving averages will be coming in to add to resistance," Sells said.
Silver was last quoted at $5.07/$5.10 a troy ounce, up from the New York close at $5.05/$5.08.
Platinum was last quoted at $361.50/$363.50 from the close at $358.30/$360.30. Palladium was higher at $339.00/$344.00 against the $336.00/$341.00 previous close.
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