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Comex gold ends down on Y2K hedge reversals

NEW YORK: Long liquidation hammered gold futures when metal markets reopened Tuesday from their four-day millennium weekend, before consumer buying helped prices rally a bit from an early 3-1/2 week low, dealers said.

Fund and dealer selling at the Comex open sent gold prices down almost $10, to their lowest since December 10. This followed heavy overseas unwinding of Y2K insurance purchases after the anti-climactic computer rollover. Most US exchanges reopened Monday with no problems.

Comex February gold ended down $5.90 at $283.70 an ounce, finding solid support at New York's $280 low, off the overnight ACCESS high of $289.50.

Spot gold was also supported around $280. Bullion was quoted late at $282.20/2.70, compared to London's afternoon fix at $281.50 and Thursday's New York close for 1999 at $287.80/8.80.

At $280 an ounce the market "started to hit a level where it is well supported out of areas like India and the Middle East, " said Ian MacDonald, head of bullion dealing at Commerzbank.

India, the world's top consumer of gold, is coming out of its wedding season of peak demand for jewelry and bars, which traditionally starts in September and concludes at year end.

The initial knee-jerk selloff had already abated when the Dutch central bank said Tuesday it sold three tonnes of gold during the last trading week of 1999, as part of a plan to sell 100 tonnes before next September.

"Whether $280 is low enough to absorb all the central bank sales we don't know at this point, particularly if they do accelerate the process," MacDonald added. "Certainly the Dutch have been very aggressive in their sales."

Other dealers said the market is growing accustomed to Dutch disposals. The sales have been confirmed about weekly since the early December news that the country would sell 300 tonnes over five years under a pact by 15 European national banks to limit sales during the five years to 2000 tonnes.

Estimated final volume for gold on the Comex Monday was 34,000 contracts, compared to an official 16,576 on Thursday.

March silver, dropped 7.8 cents to $5.375 an ounce, also rebounding from the low of a $5.42 to $5.32 range. It rallied more than 20 cents last week in the run up to year end.

Spot bullion last fetched $5.33/36, versus the fix at $5.3025 and Thursday's New York close at $5.40/42.

Platinum group metals fell, as jitters about Russian deliveries abated after news that Acting President Vladimir Putin signed an amendment to a law that had blocked PGM exports in 1999.

But it remained unclear whether Putin had also signed a decree issuing quotas for PGM exports for 2000.

Nymex April platinum fell $8.50 an ounce to $413.70, hit by locals and stop-loss sales under $415.

"It's also off on gold being off $6 and the fact a new Russian president is in and some think it will be a little more easy to get platinum and palladium out of Russia," said a PGM floor broker.

March palladium fell $7.30 to $441.90 an ounce.-Reuters