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Gold drifts lower in Europe, trades in narrow range

Written by: Staff
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LONDON, Feb 22 (Reuters) Gold prices fell in Europe on Wednesday and were seen trading in a narrow band, with market participants seeking fresh leads to lift the market.

The metal hovered in a range of about an ounce against a daily movement of - earlier this month. Dealers looked at oil and currency markets for direction and ignored suspension of operations at one of the world's largest gold and copper mines.

''We are stuck in a range at the moment and going to be pivoting around the 5 level,'' a precious metals dealer in London said.

''People are still over optimistic. We have seen some consolidation and we are still at quite decent levels so there is room for people to buy more.'' Spot gold was trading at 1.40/552.30 an ounce by 1031 GMT (1601 IST), down from 4.70/5.40 last quoted in New York on Tuesday. Prices have fallen nearly four per cent from their 25-year highs of 4.60 an ounce earlier this month.

The market noted suspension of operations at a huge mine owned by a unit of Freeport-McMoRan Copper&Gold Inc. in Indonesia's remote Papua province on Wednesday, a day after illegal miners clashed with security officers.

''A week-long stoppage could therefore lose 12,600 tonnes of copper and 63,000 ounces of gold ... although the supply of gold is far less critical from a market and industrial perspective,'' John Meyer, analyst at Numis Securities, said in a note.

Dealers watched other markets and awaited U.S. consumer price data for January, due at 1330 GMT (1900 IST), for any impact on the dollar.

Oil prices fell 0.7 per cent, while the dollar shuffled in narrow ranges against major currencies as traders looked to see whether the data reinforced expectations for more Federal Reserve interest rate increases.

A cheaper dollar often encourages gold buying in foreign currencies, while a stronger U.S. currency can prompt sales for quick profits. But the metal has not strictly followed its traditional inverse link with the dollar in recent months.

Analyst said the market sentiment was positive.

''With many of the factors that were considered bullish for gold still in place, the risks for gold are weighted to the upside,'' said Alan Williamson, head of commodity research at HSBC Bank.

''With many consumers looking to buy on any price weakness, any move lower is likely to be short-lived.'' In other precious metals, silver eased to .54/9.56 an ounce from .56/9.59, while platinum fell to ,024/1,028 an ounce from ,027/1,031.

Palladium was quoted at 7/291 an ounce, compared with 0/294.

Anglo American Plc, the world's third-largest miner, posted a 39 per cent rise in 2005 earnings, buoyed by soaring metal prices.

REUTERS SD HS1959

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