The Hindu Business Line : Gold springs to life

On February 1, the official price was $283.90 an ounce (London PM fix), up 1.8 per cent week-on-week. On the other hand, silver had a poor week and returned to true form.

The week began with gold trading modestly softer with some further long liquidation, but holding support at $278 an ounce despite a strong US dollar following better-than-expected economic data.

The occasional upward movement towards $283/oz was met with considerable selling interest.

But late on Friday, gold suddenly sprang to life and surged in a burst of fund buying, sending prices quickly $3 higher to $286/oz.

Traders were said to be short going into the end of the week and were forced to cover after the buying pressure.

``The move coincided with a raft of positive economic data from the US although quite how this translates into a higher gold price - apart from possible (though unlikely) inflationary pressure - is difficult to determine'', Mr Kamal Naqvi, analyst with Macquarie Research Equities commented.

As the recent liquidity squeeze ends, silver prices are returning to where they were below $4.30/oz as long liquidation continued.

On Friday, silver recorded $4.25/oz (London AM fix), down 2 per cent week-on-week. Further long selling pressure is likely, according to the analyst.

Both platinum and palladium fell lower last week, in the same direction as other industrial metals but at an even greater pace.

Even positive economic data from the US failed to cheer the market as current state of demand and underlying concerns about consumer stocks continued to hold sway.

Platinum closed at $453/oz, down 2.6 per cent and palladium closed at $367/oz, down 4.7 per cent.

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Gold springs to life