LONDON, Jan 19 - Gold bullion traded sideways in Europe on Monday morning, analysts said, flinching slightly at each euro/dollar movement, but they expected the day to be a quiet one as dealers await the U.S. markets to return to work from holiday. Gold's fortunes have been intertwined with the greenback's oscillations since the start of the New Year, rising to a 15-year high of $430.50 earlier in the month as the dollar fell to a lifetime low against the euro. But on Friday spot prices dropped to a one-month low of $405.30 as the dollar staged its biggest one-day rise in five months versus the euro after positive data showing increased capital flow to U.S. assets improved sentiment about the country's economy. "Gold seems to have seen a large amount of long liquidation based on the U.S. dollar. But obviously we won't expect much activity today -- London is usually a bit shy to move ahead of New York," Ross Norman of TheBullionDesk.com said.
The COMEX market will remain closed on Monday for the U.S. Martin Luther King Jr. holiday. Analysts said, despite gold dropping over five percent since the early-January peak, spot prices should rise again in the longer-term on the expected continuation of a weak dollar. "We're very much at the bottom of the uptrend. But if it holds at this level, it represents a very good buying level. The next few days could be quite pivotal," Norman said. The markets were also mulling over comments by Austrian Central Bank Governor Klaus Liebscher that he was optimistic Europe's central banks would renew a five-year agreement which restricts how much gold they are allowed to sell. The current Central Bank Gold Agreement (CBGA), seen as allowing central banks to dispose of excess bullion without flooding the gold market, is due to expire in September 2004. Peter Hillyard, head of metal sales, Europe, at ANZ Investment Bank said: "Any kind of talk like this is going to be friendly to the market. For now, people are trying to figure out whether this means anything."
By 1200 GMT spot gold traded at $406.80/407.30, a touch up on New York last quoted price of $406.20/406.95. Chartists said the yellow metal looks to be traded in a narrow range on Monday with a support of $402 and prices not exceeding $410. Silver fetched $6.32/6.34, up on New York's $6.27/6.29. Analysts said they were cautiously optimistic about silver, given it held above a support of $6.18 and its Relative Strength Index (RSI) had eased back to a comfortable 60 from an overbought 83 level. However, some pointed out the white metal dropped 8.32 percent last week; from Monday's six-year peak of $6.72, to Friday's low of $6.17. "With silver looking the most extended on the metals, I think it will be in for the biggest correction with the possibility for a pullback to $6," James Moore of TheBullionDesk.com said in a daily report. Platinum also eased higher, trading at $860.00/865 versus $853.00/858.00. Palladium traded at $210.00/215.00, down from New York's closing price of $213.00/218.00. Analysts saw palladium as last week's winning precious metal, with prices backed up by falling supply in the guise of low Russian stockpiles and a high platinum/palladium spread. "Speculations about the substitution of platinum by much cheaper palladium might therefore fuel fresh buying interest," a Dresdner Kleinwort Wasserstein daily report said. // ((For related news and prices, click on the codes in brackets: Spot gold/silver Platinum/palladium Gold lease rates Comex gold futures <0#GC:> Europe/Asia prices RELATED NEWS AND OTHER TOPICS