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Asian gold higher in afternoon but may test lower

HONG KONG: Asian spot gold rose on Tuesday after physical buying but could test lower amid poor market sentiment caused by talk of France joining the nations selling gold reserves.

Gold bullion was quoted at US$280.60/281.10 per ounce late on Tuesday compared to New York's previous close at US$279.80/280.60 on Monday.

Physical buying in Asia offset selling from Sydney and New York, traders said.

Gold fell to a 16-week low overnight on heavy fund selling after an article in the French newspaper Le Monde said a key legislator proposed the Bank of France sell gold to bolster the state pension system.

"Psychologically it isn't good for the market. You always know in the back of your mind selling is out there waiting to be done," a trader said.

But the fact France belongs to the European Central Bank, which has pledged to limit official gold sales to no more than 2,000 tonnes over five years, argued against the likelihood of French gold sales, traders said.

The talk of French gold sales came after recent sales by Britain and the Netherlands and at a time when the market was bracing for Switzerland to begin its previously announced gold sales.

A test of the US$279.00-279.50 level to see if gold would fall further was possible and the new range was US$279-283, traders said.

Spot silver was quoted at US$5.05/08 an ounce after closing in New York at US$5.08/10 on Monday.

Local tael gold was quoted HK$37 down at HK$2,607.

The carry over charge at the Chinese Gold and Silver Exchange Society was -5, up from its previous fix at -6.-Reuters