Carousel looks set for another whirl

PUBLISHED : Monday, 24 January, 1994, 12:00am
UPDATED : Monday, 24 January, 1994, 12:00am

EUROPEAN gold dealers remain bullish as they prepare for what is expected to be another volatile week on the bullion merry-go-round.

''I am expecting another up-and-down cycle as gold makes another attempt to break through the US$400 barrier,'' said one analyst in London.

The gold price battled its way to within a whisker of $393 an ounce on Thursday last week and the market was ready for a drive on $400.

But interest was generally subdued and the London price slammed back to $387.85 after a sell-off of Comex gold.

Dealers said a US fund began selling gold and silver on the futures which was absorbed by two trade houses. When the buyers stepped back, the sales continued.

Dealers were surprised that support at $390 and $391 crumbled so quickly and there are doubts now that gold can hop back quickly above $390.

Gold closed at $387.60-$388.10 an ounce in choppy Hong Kong trade on Friday.

Local gold ended HK$45 lower at $3,570 a tael.

Coins were down between HK$40 and $23.

On the Hong Kong Futures Exchange, the February contract dropped US$5 to $389 an ounce on four lots traded.

Steady buying of silver in the Far East gave bullion a good start to the week and on Monday the London morning fix was $2.50 up on the previous Friday afternoon's fix of US$392.60.

Conditions looked good for an assault on the 400-mark although dealers feared some stiff resistance between $393 and $395, which did in fact materialise.

Analysts said Asia's appetite for gold would grow steadily during the year on firm physical demand as well as increased investor interest, lending strength to overall prices.

On Tuesday prices were holding their gains and the overall trend was still bullish but dealers noted resistance at $393. The push from the Far East dried up and the market lacked general direction, with few pointers to lend encouragement.

Technically, gold was well supported at $391 but there was interest to sell in the mid-390s. Dealers seemed to be waiting for fresh news or an influx of investor money to take it higher.

There were plenty of sell orders positioned just above the market and producers were believed to be sellers at previous highs.

Nothing happened to renew enthusiasm for higher prices and the market ran out of patience. Gold slipped back and fell threw the expected support levels like a brick down a well.

Dealers dismissed any association between the surprising fall and reports that Imelda Marcos had a hoard of gold ingots stored in a warehouse in Zurich.

Silver was viewed even more warily than gold and struggled to hold a price of US$5.20.

''Silver is very dodgy and we could see another drop to below $5,'' a dealer said. ''The charts are not favourable.''