(Recasts, updates with quotes, closing prices, market
activity, adds New York to dateline)
By Frank Tang and Atul Prakash
NEW YORK/LONDON, Feb 25 (Reuters) - Gold fell 1 percent on
Monday after a U.S. official said that Congress could support
gold sales by the International Monetary Fund (IMF), stirring
fears that such sales will take a toll on sentiment and weigh
heavily on bullion.
"The fact that it has come from a U.S. official carries an
obvious weight, but the agreement has to pass through the
Congress," said James Steel, metals analyst with HSBC in New
York.
The sale of the gold requires U.S. congressional approval
and an 85 percent majority vote of the IMF's board of member
countries. The U.S. Congress has in the past opposed gold sales
to fill IMF's income gap.
"This time may ultimately be no different," said Steel,
referring to the ability of the U.S. Congress to strike any
plans to sell IMF gold.
Spot metal <XAU=> fell as low as $933.50 an ounce and was
at $937.80/938.60 at 2:15 p.m. EST (1915 GMT), against its
Friday's late quote of $943.70/944.50 in New York. It hit a
record high of $953.60 last week.
The gold contract for April delivery at the COMEX division
of the New York Mercantile Exchange <GCJ8> settled down $7.30
to $940.50 an ounce.
David McCormick, U.S. Treasury's undersecretary for
international affairs, said in remarks before a speech on IMF
reforms that he had some confidence that there would be some
support for IMF gold sales in Congress.
"We've done a fair amount of work already in terms of doing
outreach to members of Congress," McCormick told an audience in
Washington, saying there was already bipartisan support for the
move. []
McCormick added that he hope to build support for action
while President George W. Bush is still in office.
The IMF is the world's third-largest gold holder, with more
than 3,000 tonnes of bullion reserves.
Steel said gold prices were trading at high levels, and
investors should guard against profit taking on bearish news.
PLATINUM SLIPS
Platinum fell after rising towards last week's record high
of $2,192 an ounce. The metal <XPT=> was last at $2,135/2,145
after rising as high as $2,163, against New York's $2,148/2,152
late on Friday.
But analysts remained confident that the metal would set
new highs after a period of consolidation.
"We continue to believe that platinum will trend higher
over the medium term as investors seek safe havens, a hedge
against inflation and protection against a weaker dollar," Dan
Smith, analyst at Standard Chartered Bank, said in a report.
"However, platinum's fundamentals, and in particular
developments in South Africa, are likely to be far more
important drivers over the next few months," Smith said.
Platinum might average $2,300 an ounce in the second
quarter as underlying structural problems were likely to
persist for the time being, he said.
In January, the world's biggest platinum and major gold
mines were forced to halt for five days as South African power
utility Eskom restricted firms to 90 percent of normal supply,
leading metal producers to forecast declines in output.
"Platinum and palladium have been the world's best
performing commodities in terms of spot price performance so
far this year. This reflects the ongoing power shortages in
South Africa," said Michael Lewis, head of commodities research
at Deutsche Bank.
Platinum and palladium prices have jumped more than 40
percent this year.
In industry news, South Africa's Gold Fields <GFIJ.J>
forecast that gold production for the third quarter would fall
between 20 and 25 percent compared with the December quarter
due to the electricity crisis in the country. []
Silver <XAG=> hit a 27-year high of $18.15 an ounce before
falling to $18.07/18.12, versus $17.98/18.03 late in New York
on Friday. Palladium <XPD=> rose as high as $524 an ounce
before falling to $520/525, versus $498/503 an ounce late in
New York on Friday.
(Editing by Marguerita Choy)
