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London gold market quiet, unmoved by U.S. price data

LONDON: Precious metals prices eased slightly by the close on Friday showing little response to the latest U.S. economic data.

Gold closed at $394.50 compared to Thursday's $396.25.

"The U.S. figures didn't give us anything positive to go on," one dealer said. "Everyone was hoping we'd come out with inflationary numbers again."

The U.S. data was mixed, with the CPI index up 0.4 percent compared to an expected 0.3 percent, and retail sales up 0.1 percent rather than the expected 0.3 percent.

Dealers had been fairly sceptical about gold responding dramatically to any inflationary pressures coming from surging oil and grain markets which have been volatile all week.

"Precious metals are relatively cheap compared with other commodities so they should go higher anyway," a dealer said.

But they said bullion currently lacked the conviction to attempt a breakout of its $394-$396 per ounce range in the next few days.

"The range seems to be $394-$396. There has been good support under that for the past couple of days but the selling caps it at $396," a dealer said.

They said at least some of the selling on Thursday which reversed gold prices at around $396 was coming from South African producers cashing in on the benefit to local prices of a weakening rand.

In broader terms, gold would be guided by oscillations in the continuingly volatile stock markets, they said.

Also restraining business on Friday was the gold and silver options expiry on New York's Comex futures market, dealers said.

An option gives its owner the right but not the obligation to buy or sell a commodity at a stated price known as the strike price.

"For gold most of the strike prices are fairly close to the market," a dealer said.

Option buying in silver had focused on prices well above the current cash market, dealers said.

"Options at $5.75 and $6.00 have been active but it is very unlikely they will be exercised," one dealer said.

Silver closed at $5.52, down two cents and quiet while platinum was down about $3.80 at $406.75 after dealer profit taking. Palladium was about $3.00 lower at $135.75.-Reuter