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Gold poised for short-term rise

G. Chandrashekhar

MUMBAI, May 6

BREAKING its continued softness, gold firmed up in the latter half of last week to first pierce through $265 an ounce level and then stayed on. Official Friday price was $266.60/oz (London PM fix), a gain of 0.8 per cent week-on-week, following technical buying interest, some further short-covering, another pick-up in lease rates and a weaker dollar.

``We believe, gold is now benefitting from forming a good base above $262/oz and with sustained high lease rates discouraging forward selling from producers and speculators. After a good close to the week, we see further gains in the short-run,'' said Mr Kamal Naqvi, analyst with Macquarie Research Equities.

The World Gold Council reported last week that Governor of the People's Bank of China had confirmed that China would launch its first gold exchange in Shanghai in the second half of 2001. Producers will be allowed to sell directly into the market, while retailers, wholesalers and processors will no longer have to apply for licenses for gold transactions.

Apparently, China will also gradually relax restrictions on gold imports along with the country's foreign exchange reforms, but no time scale was given for this, the analyst said.

Silver continued to remain weak with no immediate prospect of a change. The metal was largely ignored again last week and drifted softly lower again. The week ended at $4.36/oz (London AM fix), a decline of 0.9 per cent.

After generally drifting lower last week, a late burst on Friday saw palladium end up on the week. The metal closed at $673/oz (1.8 per cent softer), while platinum recovered some of its losses to close at $612/oz, gaining 2.7 per cent week-on-week.