Gold firms in Europe after Bali bombings

Gold firms in Europe after Bali bombings Reuters

Gold ticked up in European trade on Monday as investors refused to short the safe-haven metal in the wake of stock market jitters prompted by the deadly bombings in the Indonesian tourist island of Bali.

Bullion was set or "fixed" in the London morning session at US$318.00 an ounce, up from the previous fix of $316.85 an ounce.

"Events over the weekend again demonstrate why traders are unwilling to be short gold," said John Reade, metals analyst at UBS Warburg.

In Indonesia, anxious families and friends hunted for loved ones on the Bali resort island after bomb blasts killed at least 183 revellers, mostly young Westerners, in a popular nightclub strip.

The worst act of terror since the September 11 attacks on the United States heightened fears the al Qaeda network, scattered from Afghanistan, was regrouping and planning more assaults.

Safe-haven gold has rallied this year on geo-political jitters ranging from fears of a repeat attack on the U.S. mainland similar to the events of Sept. 11, 2001, U.S. threats of military action against Iraq to violence in the Middle East and Kashmir this year.

Slumping stock markets, a weak dollar and a move by leading gold miners to reduce their forward sales of the precious metal have also been instrumental in attracting investor interest.

Spot gold hit $318.50 an ounce in European trading, up from $316.70/317.20 an ounce at the New York close on Friday and 14 percent higher since the start of this year, making it one of this year's best performing assets. By 10.06 GMT (05.06 p.m. Jakarta time) it had edged back to $317.50/318.00.

"The near term trading range would appear to be $316.00 to $321.00, with technical resistance located on the upside at $319.70 (9 day MA) and $320.85 (18 day MA)," said Standard Bank London.

A strong upturn in gold lease rates, led by covering by a major U.S. investment bank which came into the market to cover its holding position after a ratings downgrade led to withdrawals, had also supported the metal briefly, analysts said.

Silver perked up on the back of gold and in reaction to heavy selling last week which took the short position of the metal on the Nymex to its highest level since November last year, analysts said.

Spot silver was quoted at $4.33/35, up from the New York close of $4.31/33 an ounce.

Platinum was quoted at $587.00/592.00, down from $590.00/595.00 at the New York close.

"Platinum remains on the firm side with the battle between the TOCOM shorts and the NYMEX longs looking set to continue. Resistance is seen around $595-$600 which is keeping the market capped for the moment, but liquidity still remains an issue and could well spark another short covering if the rates tighten further," said James Moore, metals analyst at TheBullionDesk.com.

Palladium was quoted at $316.00/322.00, flat from $316.00/326.00 an ounce at the New York close.