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Comex gold in early retreat, palladium taps $600

NEW YORK: Comex gold futures were off in early trade, digesting recent gains and enjoying the most bullish market in four months, but still partially eclipsed by Nymex palladium which hit a record high $600 an ounce at the open.

Comex April gold was at $313.80 an ounce, down $4.90, trimming Thursday's $10.10 gain after extending it slightly to $320.40 in overnight electronic Access trade.

"People were getting short at the open and they covered their shorts and it looks like it's going to be a quiet day," said a Comex floor broker.

Spot gold was quoted at $310.55/1.55, down from London's early fix at $316.50 and Thursday's New York close at $315.55/6.55.

Dealer selling pushed futures down below $315, where funds had left a few stop-loss sell orders. But traders said the recent volatility had cleared away much of the nearby interest, though $311.50 basis April was attracting buy orders.

"We covered this territory recently a couple of times. There was not a lot of volume here," said the broker. "We traded down to $312. $311.50 is like a previous double bottom, so you just found some support."

The sudden outpouring of optimism, which carried futures and spot gold to four-month highs of $326.90 and $319 respectively on Monday, came after a series of reports since last week by major gold miners indicating scaled back hedge sales.

Among the producers that have said they were reducing hedging programmes are South Africa's AngloGold Ltd, the world's biggest gold miner, and Western Areas Ltd.

Canada's Barrick Gold Corp said it had halved the size of its hedge book, though it declined to swear off hedging.

Placer Dome Corp got the ball rolling last Friday, propelling gold back over $300 an ounce for the first time since late November, by saying it was suspending its hedge practices.

Reduced producer hedging has dovetailed with recent moves by central banks to cap gold sales and lending, alleviating the jitters about too much supply which helped drive bullion to a 20-year low of $251.70 last August.

Lower profiles by the big sellers could begin to restore the market's natural supply shortfall.

Demand for physcal gold by jewelry fabricators, hoarders and other investors equalled about 4,100 tonnes in 1998, according to Gold Field Mineral Services, outstripping mine supply of about 2,100 tonnes.

March silver was down 4.5 cents at $5.38 an ounce, traded $5.335 to $5.445. Spot silver was at $5.31/34, down from the fix at $5.36 and the previous close at $5.35/38.

Meanwhile, Nymex palladium was up $12.00 at $592.00 an ounce, having touched $600 on extremely light volume moments after the opening.

The contract has now chalked up a $170 gain in 2000, on fund buying and frantic accumulation by consumers facing an ongoing shortage of material from top-producer Russia.

Markets were thinner than normal because of a Tokyo market holiday. Having only just taken out $500 an ounce last week, dealers were gunning for the next big round number, hitting it with just one contract traded at the high, a trader said.

April platinum was up $2.10 at $520 an ounce. In London, palladium was fixed twice at a record $588 an ounce. Platinum was fixed in the afternoon at $541, down $4 from the morning.-Reuters