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London gold steady,

but market watching

for boost

LONDON: Gold was quiet and range-bound in Europe on Wednesday, but dealers said prices might break out after the midday expiration of over-the-counter gold options.

Dealers said the options had been strangling the market within a $390-$395 range. Options provide the right but not the obligation to buy or sell gold at a given price.

"Sentiment tends to be that it should go higher after the expiry," one dealer said. But he added that new option positions placed after the expiry may lock gold in yet another tight band.

"The market is really hoping that it will break out of this range. It needs to do so to attract customers," said a European analyst. Gold gained about a dollar early on Tuesday, but the boost failed to turn into a rally.

Bullion fixed at $391.65 per ounce, compared with $392.00 on Tuesday afternoon and $392.15 in the morning.

News at the start of the week that Canadian refiner Placer Dome had closed out hedge positions for 1.7 million ounces of gold had brought a bullish tinge to the market, dealers said.

Its Australian subsidiary Placer Pacific followed suit by closing out 700,000 ounces of gold.

Producers hedge prices by selling gold to dealers which they have not yet mined. The dealers borrow metal, usually from central banks, and sell it to the market to pay the producer for the hedged gold.

The reverse of this effectively takes gold out of the market and signals that prices may rise.

"That could help boost sentiment," a dealer said, adding that gold would have to shift above about $395 to build the impetus required for a serious rally.

Silver was unchanged from Tuesday's London close at $5.38, although it perked up a couple of cents from lower overnight prices on light European buying.

Platinum, which edged up over the key $400 on Tuesday after languishing below that level all last week, was indicated $0.40 firmer at $401.00. Palladium was up $1.50 at $132.50.-Reuter