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Gold and silver end in doldrums, PGMs revive

NEW YORK: Comex gold and silver were mostly inert on Monday, finding toeholds after tumbles Friday while palladium rebounded in illiquid markets with lingering fears of scarcity derailing a deep shakeout, dealers said.

"There was a little bit of a turnaround in platinum and palladium but no feature whatsoever in silver and gold," observed William O'Neill, director of futures research at Merrill Lynch.

Comex April gold circled breakeven through most of the $293.10 to $295.40 session, slipping 40 cents to $294.20 an ounce at the close. The contract shed $6.90 on Friday.

Spot bullion was quoted late at $291.80/2.80, a hair off London's late fix at $292.50 and the previous close at $292.10/3.10.

CFTC's Commitments of Traders report released late Friday showed that the net speculative long on the Comex had ballooned to a huge 31,008 contracts (about 3.1 million ounces) as of Feb 22, from 9,014 contracts in the previous biweekly report.

"It shows you part of the reason why the markets, when they started to come off last week, came of pretty rapidly," O'Neill said. "It may indicate some vulnerability, although we have taken some open interest off since the as-of date.

Open interest in gold futures fell 4,029 contracts on Friday to 168,604 contracts according to Monday Comex data.

Recent confidence evaporated as gold futures slid below $300 an ounce on Friday, after blasting into a higher range in early February when a handful of major gold companies said they would scale back their bullion hedging activities.

The market is also starting to discount Britain's fifth bi-monthly gold auction on March 21, when the Bank of England will conduct its final scheduled 25-tonne sale under a planned 58 percent reduction of UK reserves from 715 tonnes.

May silver, the active contract as of Monday, rose 2.2 cents to $5.11 an ounce, moving between $5.09 and $5.15.

March silver, which enters delivery period on Tuesday, rose 0.80 cent to $5.048, steadying from Friday's 13-cent rout. Spot silver went out at $5.05/08, was fixed in London at $5.0775 and closed Friday at $5.04/07.

The main feature in silver was a substantial 13.7 million ounce buildup in Comex warehouse stocks in recent days, including Friday, when inventories rose 5.06 million ounces to 91.2 million ounces.

The market has been buzzing about the accumulation, with rumours swirling that 30 million ounces in total might be on its way from London, where the market is in surplus, to New York, where dealers said a premium is earned in tight conditions.

"We'll have to see whether that's going to come or not," said Donald Tierney, of Pell Brothers Trading. "If it persists then were going to break $5.00 with ease."

Nymex June palladium, now leading open interest before first notice day, rose $32.70 to $718.70 an ounce. It bottomed at $670 Friday in the shakeout from a record futures high set early last week at $835.

April platinum ended up $13 at $465.10 an ounce.

Price improvements came after after Nymex said it would raise palladium margins for the third time in two weeks, effective Monday's close, squeezing a handful of weak shorts enough to move prices in the very light trade.

The market is recovering from paralysis after the Tokyo Commodity Exchange froze trade, ending frenzied speculation in palladium, which soared to new highs amid panic over scarcity.

Though TOCOM's unprecedented clampdown has calmed overbought markets, bullish fundamentals are unaltered. Russia, producer of 70 percent of all palladium, had failed to ship enough to meet record demand by auto makers, who, though exploring substitutes, require the metals for catalytic converters.-Reuters