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Tuesday, Mar 12, 2002

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Gold eases on upbeat US economic outlook

G. Chandrashekhar

MUMBAI, March 11

GOLD eased last week on continued long liquidation and in response to movements in currency and equity markets. Favourable economic outlook for the US and a recovery in the dollar put pressure on prices of the yellow metal. Official price of gold on Friday was $ 289.15 an ounce (London PM fix), down 2.1 per cent week-on-week. Silver too fell.

Reported selling of gold by Japan followed appreciation of the yen and stronger Japanese equity markets. Early in the week, long liquidation followed from those expecting a dramatic result to the UK gold auction. The last Comex commitment of traders report showed that the net long position of large speculators had fallen modestly from 106.9 tonnes to 90.4 tonnes.

The 17th and final Bank of England 20-tonne gold auction on Tuesday exactly met expectations rather than with the fireworks that some had expected or hoped for. The auction was declared with a price of $96.50/oz— the highest price of all the auctions— a $0.10 discount to the AM fix and $0.60 discount to the spot price at the close of bids and a bidding level of 3.7 times.

"There is the potential for further test of support during week beginning March 11, but given the strong performance in US equities following the positive jobs data and a firmer dollar, the fact that gold held near $290/oz was quite impressive'', Mr Kamal Naqvi, analyst with Macquarie Research Equities commented.

Silver began the week on a strong note rising to a three-month high of $4.59/oz helped by higher six-month lease rates and the recent raft of positive economic data prompting buying of industrial metals. After rallying higher, it fell back with weakness in gold plus a easing in lease rates. On Friday, the official price was $ 4.49/oz, down 0.2 per cent.

Both platinum and palladium were firmer last week helped by improved sentiment towards industrial metals generally. Platinum continued to be strongest of all base and precious metals so far this year, pushing beyond $500/oz and ending the week at $522/oz (up 7 per cent) with some physical buying reported, Mr Naqvi pointed out.

The trend in palladium has been more varied, but it is also gaining from optimism regarding a recovery in industrial demand for metals and ended the week at $ 374/oz, up 1.1 per cent.

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