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Gold,silver prices ease

LONDON:Gold tumbled during Friday afternoon trading in Europe to fix at the lowest since early-February, pulled down partly by silver, which was at its cheapest since mid-January.

Palladium and platinum were lower also, but these high-profile metals were looking to consolidate after the seismic movements seen recently, traders said.

Gold, which had been soft throughout the day, moved lower in the afternoon, and was fixed at $294.00 an ounce, down from the morning setting of $297.15, and well below the Thursday New York close of $298.10/$299.10.

"The whole market is long, and it is vulnerable to a typical Friday shake-out," one trader said.

Fund liquidation was prompted by the decline under the psychological $300 an ounce level in mid-week. Gold briefly fell under support at $295.00, but managed to stave off a test of the next important level around $292.00. Below here, the market is vulnerable to a slide towards $280.00. "Physical bargain hunting will certainly re-emerge, but the market is nervous and more short-term weakness may yet ensue," analyst Rhona O'Connell of brokers T.Hoare Canaccord said.

Silver was losing ground after dropping under $5.20 support, with the market depressed by rising Comex stocks, the possibility of China selling some of its reserves and the resumption of full production at major producer Penoles PENOLES.MX in Mexico.

"The trigger for yesterday's weakness in silver was the five million-plus ounce increase in COMEX inventories. This is obviously a highly visible market parameter," O'Connell noted.

However, there have been ample supplies in London for some time, so this may well be metal moving across the Atlantic to ease New York tightness, she noted.

"There is liquidation going on there as well, but there is demand at $5.10/$5/15," the trader added.

Silver was quoted at $5.11/$5.13 an ounce, down from a $5.20/$5.22 close.

Palladium was fixed at $670.00 an ounce, down $30 from Thursday afternoon's fixing, but buyer/seller spreads remained wide, reflecting nervousness and thin liquidity.

Following the shake-out induced by Japan's TOCOM taking steps to calm the market, prices were some way below the $800.00 all-time high fix set on Monday. However, palladium's direction was unclear.

Prices have doubled in the past 2-1/2 months, against a background of surging industrial demand and unpredictable supplies from Russia, the world's major supplier.

The frenetic rise was halted by TOCOM, which fixed trade at Wednesday's closing prices and urged members to close out any positions above those prices as quickly as possible.

However, there may be far-reaching consequences to this unprecedented action as Japanese investors who took short positions face heavy losses.

The consequence could be disputes, which might go to court, between the exchange and investors or between brokers and investors, Japanese traders said.

Platinum was fixed at $465.00, the lowest since January 27, as it gave up some if its recent gains. Spot was static at $460.00/$470.00 an ounce, against a previous $465.00/$475.-Reuters