20000105

Gold tumbles to 2-1/2 week lows as Y2K fears unfounded

LONDON, Jan 4 (Reuters) - Gold bullion prices started 2000 lower on Tuesday as last week's investors unwound long positions taken out as Y2K insurance.

Gold was fixed at $282.05 an ounce, its lowest fixing since December 16, sharply below the previous fix of $290.25 last Thursday.

"It (the decline) is mainly to do with people unwinding insurance they took out on Y2K fears. Nothing seems to have happened, so it has eased off," one trader said.

Last week gold recorded its highest fixing since the start of December on buying partly related to concern that the much talked about millennium bug would cause computer problems.

European bullion prices eased from the outset after U.S. investment fund selling in Asia knocked $5 off previously steady prices. But the decline was tempered near the $281.00/$282.00 level, and prices are seen staging a rally from here.

"There is good physical demand all the way down...but it is still pretty quiet. I think we will wait to see what New York does. They have not traded since last week," the trader said.

Once the current spate of sales are absorbed the market is expected to recover with the short-term objective seen around $285.00.

Spot gold was indicated at $281.95/$282.45 by late morning, down from the previous New York close of $287.80/$288.80.

PLATINUM/PALLADIUM SLIP BACK

Both the main PGMs eased on Tuesday, with palladium in particular some way below last week's all-time high fixing of $454.00.

"Technically they should be lower, but there are Russian factors here," the trader said.

Earlier on Tuesday Russia's Acting President Vladimir Putin signed an amendment to a law that had stalled the country's platinum group metals (PGM) exports except palladium in 1999.

However it was not immediately clear whether Putin had also signed a decree issuing quotas for PGM exports for 2000.

The continuing uncertainty over Russian PGM exports may be clouded further by the political transition after Boris Yeltsin stepped down on December 31, some said.

Palladium was quoted at $442.00/$447.00, a $2 decline from last Thursday. Platinum was indicated at $437.00/$442.00, a $4 loss.

Silver eased with gold, but saw little business. Spot was indicated at $5.31/$5.34, down some eight cents.-Reuters