London Gold Dips Lower In Early Long Liquidation

Bullion fixed at $385.95 an ounce, against $386.60 on Tuesday afternoon and a London close of $386.70/$387.20.

The general tone is quite bearish, a dealer said. Gold blipped up 50 cents yesterday when the first missiles went out and people went long. But they started getting out when they saw the (Mideast) Gulf had no effect on gold, he added. The London-based selling took gold below the $386 support area, with the low bid so far quoted at $385.60.

Otherwise business was fairly quiet and likely to remain so until mid-September when the seasonal lull ended, dealers said.

Gold had popped slightly higher early on Tuesday on news of the first US cruise missile attack on Iraq. But prices then drifted back to previous levels during the European trading day.

The second US missile attack early yesterday morning had elicited little initial reaction in Asian markets, before prices eased in European trading.

Time and time again the market expects gold to soar on political, economic or financial crises, analyst Nick Moore of Flemings Global Mining Group said in a commentary.

Expectations of such a response hark back to the good old days, which were probably the anomaly, rather than to gold's more measured role in today's world markets, Moore added. In fact, a sustained surge in oil prices on the back of the US attack would raise the spectre of a US interest rate hike, spelling trouble for gold, some analysts said.

Some dealers said they suspected a further easing in gold prices near term, with $383-$384 as the target. I would rather be bearish at this point, a London-based dealer said.

But others said a sizeable movement was unlikely at this point and the broader $385-$390 trading range would hold steady. Silver prices followed gold lower to be indicated at $5.15/$5.17, down two cents from Tuesday's London close.

Prices were seen consolidating in the $5.10-$5.25 area unless gold shifted lower. Support at $5.13 looking quiet stable. But if we broke through that we could easily see $5.00 again, a dealer said.

Platinum was indicated off $1.00 at $394.75/$395.75 in directionless trade. Palladium was down $0.50 at $124.75/$125.75.