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Gold runs into selling, falls below $310

LONDON: Gold ran into heavy selling around $317.00, forcing the price almost seven dollars lower in late European business on Friday, dealers said.

Spot gold weakened to below the $310.00 level from near 3-1/2-month highs after trading began in the U.S. as longs sold in a thin dealers said.

"There has been this aggressive-style buying that has been coming out of a couple of trade houses that took it up there ($317.00), but it seems to run into a wall of selling," one dealer said.

He said some of the U.S. trade institutions may have found themselves on the long side which saw some liquidation.

Dealers said the market remained nervous in the wake of a series of reports from gold miners this week indicating reduced hedging activity.

Friday's morning fix of $316.50 was just 10 cents off Monday's $316.60 which was the highest fix since October 18, 1999. Gold fixed down at $311.50 in the afternoon.

Spot gold was last at $308.70/$$310.70 from the $315.55/$316.55 New York close.

MARKET AWAITING ASHANTI NEWS

Dealers said market sentiment has improved after major producers, including the world's largest gold miner AngloGold Ltd ANGJ.J, indicated they were reducing or trimming their hedge positions this week.

But the market is still concerned about the future of troubled African miner Ashanti Goldfields Co Ltd AGC.GH, which faces a deadline to pay up for derivatives contracts from its hedge counterparties on February 17.

Ashanti suffered massive losses on its hedge book after gold spiked to two-year highs last October. A Ghana court this week blocked a key refinancing plan. Ashanti had been due to sign a $100 million loan, needed to pay for work on its promising Geita gold project in Tanzania.

Now, under the court ruling in action brought by dissident shareholders, the company will have to wait until after an extraordinary general meeting, called to consider the composition of the board, which must be held within 21 days.

Dealers said market players were establishing long positions ahead of any Ashanti outcome.

"I can't see gold coming of too far without buying coming in because the Ashanti thing is still overhanging the market," a dealer said.

PALLADIUM RALLY FAILS NEAR $600

Hedging was profitable when gold headed toward 20-year lows around $251.70 an ounce last August. But it caused huge losses and shareholder revolts against some mining companies when prices soared after an agreement last September by European central banks to limit gold sales and lending for five years.

Palladium's recent strength continued. It was last quoted at $587.00/$597.00 from the New York close at $575.00/$585.00 and platinum at $542.50/$549.50 from $541.00/$551.00.

Dealers said palladium moved higher on good demand in a thin market with Japanese traders absent due to a Tokyo holiday but failed to hold onto higher levels just shy of the $600 level after a surge in U.S. palladium futures on Friday.

The platinum group metals have rallied sharply since the start of the year with demand soaring, mostly from car companies needing the metals to fabricate autocatalysts to clean dirty exhaust gases, and little or no metal arriving from Russia.

Silver was quiet, following gold lower and was last quoted at $5.28/$5.31 from the New York close at $5.35/$5.38.-Reuters