London Gold Firms, Silver Recovers

We're set for a continuation of the $385-$390 range, a London-based dealer said, despite a bearish mood sparked by gold's failure to rally this week on US air strikes on Iraq.

Business was still slow because of seasonal doldrums, but light physical buying at dips to the $385 level pointed to support there, he added. Gold was fixed at $386.00 an ounce, compared to $385.60 on Wednesday afternoon and $385.95 in the morning.

The market was keeping an eye on oil prices, which surged this week following US missile strikes on Iraq, for signs of any impact on inflation, dealers said.

Most dealers said the missile strikes alone would not be a factor for gold unless conflict escalated sharply. US employment figures due out today would also be watched for signs of inflationary pressure.

But some analysts discounted the idea that higher inflation was bullish for gold, traditionally considered a safe haven during times of political and economic uncertainty.

Basically, inflation does not have an effect on gold. The figures and oil prices are important in terms of whether they will prompt the Fed to raise interest rates, a dealer said.

An interest rate rise would increase its holding costs and make diminish its appeal for investors, analysts said.

Silver continued to hold within the recent $5.15-$5.25 range after briefly probing lower on Wednesday. It was up two cents from Wednesday's London close, at $5.20 an ounce.