London gold fixed at $254.70 a troy ounce in the morning versus Thursday afternoon's $253.15 after spot market gains made from the start of European business.

Spot gold slipped back after the fix to $253.75/$254.15 versus New York's Thursday close of $252.50/$253.00.

"$255.00 will be the next level on the upside to watch closely today, but cautiously as the general consensus remains skeptical on the medium term," Frederic Panizzutti, head of strategy at Geneva-based metals refiner and trader MKS Finance, said in a report.

Monday's bank holiday in Britain was likely to drain liquidity from an already thin market, dealers said.

"One suspects things will be quieter than usual. It's an excuse not to do anything," said Gerry Celaya, senior director of treasury at American Express Bank.

Gold must crack $255 resistance before having any chance ofreaching last week's peak near $262, Celaya added.

Spot prices hit fresh 20-year lows beneath $252 earlier this week, chipping away at the levels reached after Britain's first 25-tonne gold auction on July 6.

Britain announced in May plans for five auctions betweenJuly and next March in a programme of sales to cut gold reserves by 415 tonnes and replace them with dollars, euros and yen.

The next auction, on September 21, has already promptedoption activity around that date by those wishing to hedge their exposure to the market.

Hong Kong dealers said the auction would increasinglydominate market thinking.

"We wouldn't be surprised to see the price reach $250 or below next week," one trader said.

Silver was last one cent down versus its $5.12/$5.15 NewYork close, holding clear of key support levels dealers said lay in the $5.03/$5.05 zone.

Platinum was 80 cents higher at $349.00/$351.00 and palladium was $1 up at $338.00/$343.00.