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Gold prices depict sensitive trend

LONDON: The gold market remained very sensitive to producer action on Wednesday and the platinum group set fresh highs after a brief bout of nerves.

In Europe spot gold bullion prices jumped over three percent and touched $310.00 an ounce on market talk of a producer buying back its hedge position.

The previous day's trading had seen the price fall below $300 after Barrick Gold said it was continuing its hedging programme but on Monday gold had hit $319.00 after Canada's Placer Dome said it had decided to suspend its hedge sales.

On Thursday the world's biggest gold miner, South Africa's Anglo Gold announces its quarterly results and the market will be watching for any comment it makes on its hedging - producer forward sales to lock in higher prices.

At the second of its twice daily London fixing sessions gold was set at $308.60 an ounce against Tuesday's New York close at $298.00/$300.00.

"It feels like a producer buyback going through the market. It is quite aggressive and it (gold) feels like $310," one London dealer said.

But dealers were wary of the market's volatility.

"We remain very cautious, especially during the afternoon, as the COMEX session is expected to be very volatile again and volumes rather significant," Frederic Panizzutti, vice-president strategy and research at MKS Finance in Geneva.

Platinum and palladium prices continued their meteoric rise on Wednesday after brief hiccup when European traders queried whether the market could sustain very sharp gains made in Asian trading.

Palladium was fixed at an all-time high in Europe of $580.00 an ounce, up from Tuesday afternoon's fixing of $567.00, while platinum was fixed at $548.00 an ounce, its highest since April 1989 and up from Tueday's PM fix of $515.00. "The price is likely to keep on going up," Panizzutti said. "There's big industrial demand and no supply, and that won't change in the short term," he said.

In late afternoon trading palladium was quoted at $590.00/$600.00 and platinum $552/$562.00.

London dealers said the fundamental picture and a shortage of supplies from Russia, which had fuelled the rally in platinum group metals (PGMs) this year, remained unchanged.

Russia supplies around 70 percent of the world's annual palladium needs and 20 percent of its platinum, but internal bureaucracy has delayed shipments to the West, where demand from the automobile industry for catalysts continues to boom.

Although high prices are hurting car makers -- both platinum and palladium are over 30 percent higher this year -- no viable substitutes are seen emerging soon, analysts said.

Major South African platinum and palladium producer Impala Platinum Mines on Wednesday noted that auto company demand continued unabated for palladium. Platinum jewellery sector offtake was growing also, with Chinese consumption seen above expectations.

It said it is to restart its Crocodile River mine in South Africa, with production from the Maroelabelt area expected to start as early as January 2001.

Crocodile River will provide additional 80,000 PGM ounces a year, while production at Maroelabelt area will add 50,000 ounces of platinum each year.

World platinum supply in 1999 was around 5.06 million ounces and palladium 7.67 million, according to refiner Johnson Matthey.-Reuters