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French sale denial lifts gold sentiment in Europe

LONDON: Sentiment in Europe's gold markets picked up in late trade on Tuesday after the Bank of France denied reports it could sell gold from its reserves.

The price rose slightly to trade at $280.50/$281.50 a troy ounce just before the close after spending the morning hovering around $280.00, its lowest since early January.

Traders said the price had not picked up significantly, but sentiment was stronger.

Speculators had been spooked out of stale long positions by an article in French newspaper Le Monde, which reported that the head of the parliamentary finance committee had said Bank of France gold reserves could be tapped to cover future shortfalls in the pension system.

Gold fixed at $280.65 in London in the afternoon, up from the morning's $280.30 the lowest fix since January 6.

France is a signatory to the so-called Washington Accord a pledge in September 1999 by 15 European central banks to limit gold sales to 2,000 tonnes over five years.

"The French government couldn't do anything, anyway it has to hold on to its gold until the end of the accord in 4-1/2 years," the trader said.

France holds around 3,200 tonnes of official gold reserves and at the end of 1998 was the third-largest holder of official gold after the United States and Germany.

Bullion dealers said $280.00 was crucial for gold. If that gave way, the next downside target would be $278.00-$277.00 down to $275.00, although physical demand was lending support at current prices.

Silver followed gold to pick up from the lows at the close and was last quoted at $5.07/$5.09, still down from the New York close at $5.08/$5.10.

"This industrial metal has good physical demand underpinning the price below $5," Standard Bank said in a report.

Platinum and palladium prices saw little business.

The market still awaited news of when Russian shipments of metal could be expected following Vladimir Putin's victory in the presidential elections at the weekend.

Platinum was last at $480.00/$488.00, up from the close of $475.00/$485.00, and palladium at $605.00/$635.00, up from $600.00/$640.00.-Reuters