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Gold firmer, silver

higher in NY

NEW YORK: Comex gold settled firmer, scoring modest gains at the close on fund short covering, traders said, although gold continued to lag the rallying silver market.

The buying was viewed as pre-weekend book squaring, while traders and analysts downplayed the impact of news near the close about an upcoming U.S. military exercise in Kuwait.

December gold settled $0.90 higher at $389.90 an ounce, traded between $390.80 and $388.60. This was the fourth week in a row that December ended in the $389-$390 zone. Volume was modest at an estimated 18,000 lots versus Thursday's 35,395.

Dealers quoted bullion at $384.80/$385.30.

Traders strongly doubted that gold's late gains were in any way connected to news minutes before the close that the U.S. would hold military excercises in Kuwait in about 10 days, rather than in the fall as planned, as a warning to Iraq.

Gold continued to lag the silver market, which rallied throughout the week amid signs of nearby supply tightness. The gold-silver ratio narrowed significantly this week, falling to about 67.7 at today's close from the prior week's 73.9, based on the December contracts.

Traders said expectations of producer selling of gold above $385 an ounce in the spot market helped keep a lid on prices.

News today of a hedging program by South Africa's Beatrix Mines Ltd for 2.9 million ounces of gold was also termed negative for the market.

Expectations of physical demand at $382, especially from the Far East, were helping to underpin the market, while speculators looking for volatility were seen preferring silver and platinum, which rose sharply this week, to gold. SILVER Comex silver settled sharply higher, regaining near the close some of the gains lost earlier in the day, as the market continued to attract buying amid signs of nearby supply tightness, traders said.

The market rallied after the opening to fresh three-month highs on fund buying, but drifted lower through most of the session until managing a late surge.

The market has rallied strongly this week, amid widespread speculation that the nearby tightness was due at least in part to one or more players attempting to squeeze supplies.

Although short-term lease rates and the exchange for physical eased Thursday and today as prices rose, Comex warehouse stocks declined sharply.

Data released after today's close showed a drop Friday of 11,352,520 ounces to 154,024,227, following a fall of over nine million ounces on Thursday.

September silver settled 11.7 cents higher at $5.697 an ounce, traded between $5.76 and $5.61, and gained 48.2 cents from last week's close. Volume was heavy today at an estimated 48,000 lots, including 5,028 switches, although this was down slightly from Thursday's official 49,830.

Traders said sentiment in the market was bullish with a push to $6.00 seen increasingly likely, although they were very wary as it was unclear what was behind the tightness and how long it would last. PLATINUM NYMEX platinum settled higher, buoyed by an early rally in silver, traders said.

One trader noted that the market continued to recover from an oversold condition, after a fund-led selloff in recent weeks that last Friday took the active October contract to a 4-1/2 month low of $414 an ounce.

October platinum settled $2.70 higher at $431.10 an ounce, traded between $432.00 and $426.00. The contract gained $15.10 from last week's close. Today's volume was moderate at an estimated 2,924 lots, down from Thursday's very heavy 10,131.

September palladium went out unchanged at $151.85 an ounce.-Reuter