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Monday, Aug 04, 2003

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Gold testing range

G. Chandrashekhar

Mumbai , Aug. 3

A VOLATILE week for the precious metals with strength across the complex (along with base metals) early in the week followed by profit-taking in gold and platinum late in the week with prices falling from highs back towards recent support levels, while silver and palladium (that have tended to be the under-performers until recently) actually firmed again slightly.

Fund buying was notable in both gold and silver early last week, with gold rising to six-week highs above $365 an ounce. The return of fund interest was also evident from the latest Comex commitment of traders' report that revealed fresh long buying in gold with the net long position in gold rising by 37 tonnes to 122.6 tonnes during the week to July 22.

Trading across the metals complex has been a feature, both up and down, in recent days with commodities returning to fashion as an asset class in their own right, commented Mr Kamal Naqvi, analyst with Macquarie Research Equities.

The second-half of the week was more notable for profit taking in gold despite mixed messages from the US economic data that was susceptible to either bullish or bearish interpretation.

Such uncertainty was also evident with the degree of volatility in the bond market. The stronger dollar was, of course, also obviously a factor, although there seemed to be a move away from metals more generally — a reversal of the earlier performance, according to Mr Naqvi.

Official price of gold on Friday was $352.35/oz (London PM fix), down 2.9 per cent week-on-week ($363/oz). Latest round of company report releases confirm the continuing strength of de-hedging in the second quarter.

Silver prices spurted last week to reach a three-and-a-half year high of $5.21/oz on Wednesday on the back of continued strong fund buying before softening mid-week and then diverging from gold but in line with the base metals, firming again later in the week. On Friday the metal was quoted at $5.12/oz (London AM fix), up 2.1 per cent.

Palladium attracted steady buying interest through the week; and over the week rose an impressive 9 per cent to close at $182/oz (London PM fix), while platinum was much more volatile with prices rising strongly early in the week back to $700/oz, in line with most other metals, but then falling quickly again back to $677/oz on Friday.

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