960409

Gold prices show

firmer movement

in Europe

LONDON: The gold market drifted off its highs on Tuesday when a modest rally by U.S. investment funds fizzled out, dealers said.

"We're going to need to see some good follow-through or we'll be drifting back down again," one dealer said.

The funds had pushed up prices late on Monday in New York in the wake of a tumble in bonds and Wall Street shares, but by Tuesday afternoon the bullion market had pared its gains.

The rise did not come close to six-year highs hit in early February when gold peaked at $418 per ounce after a frenzied rally led by the funds.

When the funds cashed in their gains, prices retreated and have been languishing under the key $400 level ever since.

On Tuesday afternoon, bullion fixed at $396.30 per ounce, down $1.30 from Tuesday morning.

But the London close at $396.05 was still $2.80 higher than finishing levels on Thursday before the European market closed for the long Easter weekend.

Monday's move was not due to any fundamental change in investors' portfolios after the 88-point slide in the Dow Jones Industrial Average on Monday, analysts said.

The Dow was higher in early trade on Tuesday but had slipped back about 15 points by the Euroepan close.

Most European markets were closed on Easter Monday.

The initial tumble in the U.S. stock market on Monday sparked little immediate reaction in gold. In fact, by the time the funds had piled in, the Dow had pared its losses, prompting scepticism, by many in the bullion market.

"It hasn't broken out of its range and until it does were going to find there are a lot of cynics," a dealer said.

Gold has been trapped within a price band from about $390 to $402 for the last six weeks.

"There's an awful lot of producer selling waiting above 4400," he said, referring to gold mining firms in North America, Australia and South Africa.

Silver followed gold, closing in London off its highs, but five cents higher than Thursday at $5.52 per ounce. Platinum ended $3.65 firmer at $409.15 per ounce and palladium finished 75 cents higher at $140.00 per ounce.-Reuter