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Gold ends weaker,

silver firm

LONDON: Gold trended weaker in early European trade although silver's continued strength ahead of today's Comex option expiry lent some support to prices.

Gold was fixed at $383.90 an ounce, a little weaker than its close in London yesterday at $384.00/$384.40. The trading range so far this morning was $383.70 to $384.50.

"The market looks pretty awful but all eyes are on silver and the options expiry tonight," one London dealer said.

The dollar's strength was an additional negative factor for the whole precious sector, although some dealers interpreted gold's muted reaction so far as an encouraging sign.

Gold's failure to break $385 was weighing on sentiment and dealers predicted a return to the lower end of the recent range around $382. A big move either way in silver would either accentuate gold's fall or help the market move higher.

But producer activity was expected to cap gold between $385 and $386 should silver rally strongly and take gold with it.

Silver was quoted around 530/532 cents in early Europe, up on its close in London yesterday at 525/527 cents.

Metal remains in short supply, suggesting a speculative squeeze, engineered by one or more financial institutions to push the market higher, dealers said.

They recalled the move earlier this year linked to Phibro, when call options were exercised above the market and silver shot above six dollars. Although the company never confirmed its involvement it was again cited by dealers as being potentially behind the current play.

High lease rates for silver continued to prevent bullion dealers from shorting the market and some suggested the dominance of long positions left silver vulnerable to a sharp sell-off, depending on what happened at the expiry later.

"I wouldn't be surprised to see silver above 550 cents or below 480 by Monday morning," one said. "A big move is coming."

The other white metals drew little comfort from silver and were under pressure in early Europe. Platinum was attracting very little interest and had drifted to $420.25/$421.25.

Dealers said August was a traditionally bad month for the platinum price as industrial demand slackened. The market looked now to be heading towards $418 support.

Palladium was also weak and poised precariously just above a key level at $148. Should this be broken, fund liquidation could be expected and prices could drop dramatically. The $138/$142 area would provide an initial floor, dealers said.-Reuter