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Gold pares gains

NEW YORK: COMEX gold pared gains at midday, consolidating after an early rally with silver amid worries about nearby supply tightness in the white metal, traders said.

They noted technically driven fund short covering lifting gold to three week highs after the December contract breached last week's high of $391.30 an ounce.

At 1203 EDT, December gold was up $1.60 at $391.50 an ounce, traded between $393.50 and $390.00. A low of $389.80 was hit on ACCESS trade overnight.

Traders noted that the price began trailing off after the fund short covering had been absorbed and trade selling entered the market.

Although most traders saw gold continuing to take its lead from the silver market, some analysts also cited volatility in the foreign exchange markets, where the dollar rallied on concerted central bank intervention, as supportive for gold.

SILVER

COMEX silver was firmer at midday but pulled back from two-month highs hit during an early fund-led rally.

Traders said the higher prices reached during rallies in the past two days were helping to bring more metal to the market, slightly easing the nearby tightness that has persisted since early last week.

Traders said last night's sharp drop in COMEX warehouse stocks helped underpin sentiment. Stocks have fallen to less than 177 million ounces from over 265 million in early March.

Traders remain wary, however, about the possibility that the stock drawdown, as well as the recent supply tightness, may be due to speculators attempting to manipulate prices.

At 1228 EDT, September silver was up 5.8 cents at $5.41 an ounce, retraced from its early high of $5.49. December was up 5.7 cents at $5.47.-Reuter