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Gold drifts to close

LONDON: Precious metals drifted lower in quiet European trade on Tuesday with silver, the leading market, pausing for breath after recent heavy gains.

Gold closed at $384.05 an ounce against Monday's $384.35.

Dealers said business remained sluggish and that without continued silver strength the market would probe lower.

Silver, which hit fresh highs above $5.80 an ounce on Monday, eased back to close at $5.71 on Tuesday from $5.76.

Dealers said the sharpness of the recent advance meant that a price correction would now be beneficial.

"It has gone up so far, so fast that a small pull-back from here is not surprising. Silver is in no-man's land," one said.

At the beginning of August silver traded as low as $5.00.

But news late on Monday that warehouse stocks in New York fell by another 5.78 million ounces will again help to fuel bullish sentiment on both side of the Atlantic.

Stocks there have fallen by 25 million ounces over three consecutive days and now stand below 150 million ounces, their lowest for six-and-a-half years.

Analysts have speculated that metal was being shipped here from New York to alleviate tightness in the spot market.

And on Tuesday morning British Airways confirmed that the airline had participated in shipping silver from the United States.

"I heard last week that we did participate but I have no more information. I would be surprised if we were the only airline involved," a BA official told Reuters.

Dealers said the impact of the speculative squeeze had moved from the London cash market to the September contract on the Comex futures market in New York.

"The focus has shifted and it looks as if the squeeze will carry on there," one dealer said.

Platinum followed silver's lead and eased off from its previous close. It traded around $2 down at either side of $430 and closed at $430.25, down $2.

A report that National Union of Mineworkers' members had gone on strike at a refinery of the South African Producer Impala Platinum Holdings Ltd had no impact in the price.

Company management said production was unlikely to be affected.

Palladium was also inactive and held steady to close unchanged at $151.50.-Reuter