Gold fluctuates as Busang effect ebbs

Gold fluctuates as Busang effect ebbs

LONDON (Reuter): Gold prices were higher in London but
surrendered some of the gains racked up in New York as the effect
of the uncovering of the fraudulent claims for the Busang gold
deposit faded away.

London dealers returned from a three-day weekend yesterday to
find the shock announcement that initial results on Bre-X Mineral
Services Ltd's Busang deposit in Indonesia, originally put at 71
million ounces, were falsified on a scale "without precedent in
the history of mining".

Although the fact that what was thought to be the biggest gold
find ever would not come onto the market might have helped New
York's rally to $344.80, dealers saw no long-term effects.

"If it (Busang) actually became active, then to finance it all
sort of hedges would be put in place...and if gold wasn't really
there then you would have to buy them back. But we were never
that far advanced," said a London dealer.

The gold market was "too big and it has been around too long"
to reel under one mine failure, he added.

Bullion fixed at $342.80 an ounce compared with Friday's fix
of $339.65. At 1030 GMT spot gold was quoted at $342.50/$342.80
after reaching a high of $343.40 earlier.

But with stock markets rushing to new peaks most dealers were
skeptical about a continued rally, and fears of future central
bank sales were also keeping sentiment down.

"We have unfortunately got resistance levels all over the
place. Before we can get excited about gold we have to go through
$346 and before you get there you have $345," said one.

Further rallies might also reward the patience of some
producers that had been holding back for higher gold prices.

"I think we are still very poised for a move in either
direction," said the dealer.

Support seemed to be well-founded at $339.00 after several
attempts to break lower, but the potential for bargain hunting
could also have thinned after the market rallied from its lows.