LONDON, July 7: Gold prices fell to fresh lows since December 1985 on Monday as the market's overwhelmingly pessimistic tone flushed out disillusioned investors.

It fixed at $318.75 per ounce down from $324.45 on Friday and several dealers and analysts said they expected further falls.

Gold has lost about 13 per cent of its value so far this year under threat of selling from central banks as they reviewed the worth of holding gold reserves. Reserves held by the centrals and other institution total around 35,000 tonnes.

The latest price fall came after the Reserve Bank of Australia announced last Thursday that it had sold 167 tonnes of gold from its reserves.

The news followed very publicly stated pondering on gold policy by the German, Swiss and US central banks this year and the announced sale of 300 tonnes by the Dutch central bank.

"It has fallen so far so fast that you would think it should rally. But it would take a Martian to be bullish at this point," analyst Andy Smith said.

South Africa's Randgold and Exploration announced on Monday that it was closing the Benoni Gold Mining unit of its loss-making East Rand Proprietary Mines due to the low price.

"You just don't know the next levels. Normally you would expect short covering and profit taking to aid a recovery but lots of shorts are in the $330s and $340s so they are happy to wait for another five of 10 dollars," he said.

"Sentiment is very bearish. You would expect to see some support at $310. if you could find somebody brave enough to go long," a dealer said.

He added that despite the low prices, physical demand was not responding significantly. "The jewellery makers are not buying any more than usual as they think gold will be cheaper soon," said a dealer.

The other precious metals were lower with gold. Silver was at $4.48-$4.50 down six cents, platinum was $6 lower at $413-$417 and palladium losty $9.00 to $181.00-$185.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.