"My feeling is it's going to be like the third auction, which is negativebut nowhere near as negative as the first," Macquarie Equities Ltd analystKamal Naqvi said. Dealers said the Bank of England auction in November wasaround two times oversubscribed and saw a $20 fall in the price, while theSeptember sale was eight times oversubscribed, which led to a rallly ofaround $85. Traders Standard Bank London said in a report on their website.

"The outcome of today's auction clearly holds the key to the next majorprice move. "If the lowest accepted bid is above $288 it would probably beseen as positive and lead to a break above the $290 resistance, while aresult below $286 could spark a bout of fund liquidation and penetration ofthe $285 support."

Tuesday's auction is the fourth in a series aimed at cutting the UK's goldholdings by 58 per cent to 300 tonnes. Analysts expected prices to fallafter the results of the sale are announced at 1215 GMT unless South Africanminers or funds bid aggressively. "There is a possibility the SouthAfricans could buy back into the auction (as they have in others). If we geta good subscription rate (it could firm) but resistance above $290.00 isheavy," Naqvi said.

After many tumultuous months of central bank sales and talk of sales, goldhas returned to the $290 level at which it greeted news last spring that theUK would cut gold reserves to 300 tonnes from 715 and modernise itsportfolio. This time around, the gold price is seen near these levels, withdemand just above the offer. Low volumes, narrow ranges, flat positioning,low gold lending rates and only modestly elevated options prices suggest aquiet sale aftermath. Gold lending rates are also much lower than beforeprevious auctions.

Lease rates for one-month metal were around 0.37 percent on Tuesday,compared with 2.5 per cent before the November UK sale, 3.6 per cent beforethe September sale and 2.9 per cent before the first British sale on July 6.

Asian gold higher, awaits UK sale
Asian midday spot gold was quoted about $1 higher from the opening price asthe market braced for a UK gold auction later on Tuesday. The Hong Kongmidday gold ended at $288.30/80 per ounce, up from its opening price of$287.20/70 and New York's $287.40/90 close on Monday.

Many players were taking a wait-and-see attitude about the 25-tonne auction,Britain's fourth to reduce gold reserves by more than half to 300 tonnesover several years. "Not many people are willing to take a view on theauction and play the market," a Hong Kong-based trader said. Price movementsup and down on the day of the sale were usual in the past, the traderfurther added. The results will be announced about 1215 GMT. Strong demandfor the gold at auction would indicate a firmer supply scenario in the wakeof a self-imposed cap on gold sales and lending by European central bankslast year, said Bell Securities Ltd analyst Keith Goode in Sydney.

Expectations of stronger gold consumption by gift-givers during the ChineseNew Year and Indian wedding seasons, coupled with a long-running supply-sideshortage between annual new and recycled production and global demand, werealso lending support.

"Demand has picked up a bit," said NM Rothschild and Sons Chief economistRic Simes. "There's a fair chance the price will rise," Goode said. TheCommonwealth Bank of Australia analyst David Thurtell expects gold to rallyby about $5 after the results of the auction are known.

"Nothing too major, but with physical demand in the wings and big minersreasonably bid in previous auctions, we can see the upside," Thurtell said.Spot siler ended at midday quoted at $5.25/28 per ounce, up from the openingprice of $5.23/26. Tael gold at midday was quoted at HK$2,671 per tael, upHK$6 from the opening price of HK$2,665 per tael.

Gold eases post-auction
Gold eased by $1.25 per ounce to $2890/$289.75 after the Bank of England's(BoE) auction on Tuesday.

Immediately before the sale the price had been at $290.25/$291. The market'sreaction was slow, with no change in prices until 1219 GMT, after the salewas announced at 1215 GMT.

The approximately 25 tonnes or 8,03,600 ounces of gold on offer wereallotted in full at a price of $289.50 an ounce. Gold had fixed on Tuesdaymorning at $288.70 an ounce. By 1225 GMT spot gold was quoted at$289.25/$290.