Strong dollar dampens gold demand
Gold prices see-sawed during Wednesday's rangebound European session, but failed again to get much nearer to $275, due to a firmer US dollar versus the euro. "Gold is generally weaker after having found resistance below $275 and in such thin summer markets, there is little interest, so there is no follow-through buying around," said one dealer.

He said physical traders were holding back in anticipation of lower prices, "but $272 should hold for the moment." Dealers said the main concern remained the currency market influence, with the strong US dollar weighing on physical demand, resulting in price pressure.

Earlier in the session, the dollar stormed to a three-month high against the euro on wariness about European central bank intervention. As the euro drops, gold is more expensive in local terms for European consumers, so demand levels may fall. "With nothing else to move the price, gold will be driven by dollar moves and that's making some people a bit more cautious," said another trader. At the close, spot gold was at $272.85/$273.35 a troy ounce from Tuesday's New York close at $273.00/$273.50.

Weak sterling limits cocoa losses
On the London International Financial Futures Exchange (LIFFE), cocoa continued to gain ground Wednesday in currency- related buying. "It was pretty lifeless really," one broker said. "Althoug hit seems to be continuing to absorb the selling from Ghana." Active December cocoa last traded nine pounds higher at 608 a tonne, just off the day's high of 609, having earlier fallen to 600. The world's second biggest cocoa producer, Ghana, is widely estimated to have recently hedged up to around 50,000 tonnes of its 2000/01 main crop, which has been exerting downward pressure on prices.

But the continuing weakness of the pound sterling has helped to absorb losses on the UK market via arbitrage buying. Sterling plumbed seven-year lows against the dollar on Wednesday, also falling to four-week lows against the euro, on expectations that British interest rates are at or close to their peaks. Sterling slid as far as $1.4424, its weakest showingsince March 1993, before making a modest recovery.

Base metals eye further gainso
London Metal Exchange (LME) base metals closed positively on Wednesday on technical fund buying, dealers said. "Most of the metals have had technically good closes, although the moves up haven't been based on consumer buying," Martin Squires, analyst at Carr Futures said.

-- (Reuters)Three-months nickel ended the afternoon at $8,540 a tonne, up $40 from Tuesday's close.

Nickel peaked midsession Wednesday at $8,630, but was driven down by news from Falconbridge Ltd that contract Union talks at its Sudbury, Ontario, mining complex were on again after having been suspended over picket line disruptions Tuesday.

Falconbridge produces four percent of the world's nickel from Sudbury, or 35,000 tonnes a year.

Copper ended the day up $12 at $1,924 and is seen consolidating for a while before it launches an attack on the year's high at $1,945.

Aluminium also rallied on fund buying Wednesday, ending the day $25 higher at $1,593. Dealers said the metal's next target is the psychological $1,600 barrier, but added it was unlikely to be able to hurdle that level without the impetus of consumer buying.

-- (Reuters)