London gold hit $271.70 at the day's second fixing, down on the morning's $272.65 and marking a fresh 20-year low since May 30, 1979.

London's gold fixes have marked successively lower levels since late last week, continuing a decline in the spot price spurred by Britain's early May announcement of plans to cut reserves by more than half to 300 tonnes.

Bank of England governor Eddie George defended the move before a parliamentary committee on Tuesday, describing market reaction as overdone and misguided in its assumption that the UK sales heralded others by the world's large gold holders.

"It's a straight forward portfolio decision and it's a perfectly reasonable decision. Britain has 43 per cent of its net gold and foreign exchange reserves in gold and that is a very big exposure to a single asset," George said.

RhonaO'Connell, metals analyst for brokers T Hoare & Co, disputed George's figures and the suggestion market sentiment would weather the country's sales.

"Tonnage, yes. Sentiment, forget it," she said in a report which damned the use of "net" reserves as "outrageous".

"Current gold holdings are just under 16 per cent of gross reserves and falling to around 7 per cent, against a world average of 18 per cent and 15 per cent for the European Central Bank. It is in this context that it should be read," she said.

In fundamental news, the World Gold Analyst magazine said gold output from the world's main mines dipped by seven per cent to 12.23 million ounces in January-March compared with the final quarter of 1998.

Average total cash costs edged lower to $199 per troy ounce, balancing a 10 per cent fall in Canadian costs with an eight per cent rise in Australian ones, it said in reference to data covering 70 per cent of world production.

Spot gold was traded last at $271.70/$272.20, down 50 cents from lastMonday's New York close but holding above support at $270.00.

Silver was two cents up at $5.06/$5.09, while palladium recovered from an earlier dip on Swiss customs data showing 20 tonnes of Russian metal arriving in April.

Palladium was last down but off earlier lows at $329.00/$334.00, $2.05 below its New York close, while platinum was at $357.00/$359.00 versus $358.10/$360.10.