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Asia Gold-Most are fence-sitting ahead of UK sale

HONG KONG: Spot gold was holding a narrow US$285-290 range on Friday and market sentiment was neutral to slightly bearish ahead of next week's UK gold reserves auction, dealers said.

Gold rose early in the week as producers bought back hedges, but that activity was over for the moment, traders said.

"Sentiment is a little bearish for the auction. Gold can't hold above US$289," a dealer in Sydney said.

Britain will auction 25 tonnes of gold on Tuesday, the fourth sale since July 1999 aimed at reducing the central bank's gold by 415 tonnes and replacing it with currencies and other assets.

Gold sank to a 20-year low last year after the first British gold auction.

The Sydney trader said people apparently were hoping to buy gold a little cheaper after the auction.

But at the same time there were no strong signs they were selling the market short prior to the auction, he said.

The possibility of more producer buybacks and a general bullishness in commodities markets since the start of the year helped to keep most people neutral, the trader said.

"The market doesn't appear to be positioned one way or the other. People are waiting for the results and will take a view on gold then," he said.

But weak demand for the auctioned gold such as occurred in the first sale last July would depress the price, a Singapore trader said.

"There is a general feeling that we won't see much bidding in the market. If the amount subscribed is 1-or two times the amount offered we may see the gold price move down to US$280-282," he said.

Spot gold was quoted at US$287.90/288.40 an ounce.

Another trader noted that gold saw gains earlier this week amid increased concerns over US inflation and rising oil prices.

"Conditions are a little better than previous auctions, but one must not get lulled into a false sense of security," the Hong Kong dealer said.

GOLD GETS GOOD PHYSICAL SUPPORT

Gold was well supported by physical demand in the low US$280s, one dealer said.

Demand from Taiwan increased, possibly from gold jewellery demand, said the trader in Hong Kong where the premium for kilobars over London prices was slightly higher at 60 to 65 US cents.

Taiwan's gold imports were likely to rise further this year thanks to economic recovery and steady growth in industrial demand, a senior gold dealer told Reuters this week.

Terry Yang, chief gold dealer at Central Trust of China, predicted imports in 2000 would rise to 95 to 100 tonnes compared with 84 tonnes in 1999.

In Singapore demand weakened with the end of Ramadan and the Christmas holidays. The premium declined by 20 US cents per kilobar to 60 to 70 US cents over London prices, a trader said.

Nor was there noticeable improvement from holiday-related buying for the lunar new year which falls in early February, he said.

"The Chinese New Year is not having much effect," the trader said.-Reuters