LONDON, Oct 9: Gold prices swung around in volatile trading, hitting their highest levels for two years before falling back gently towards the weekend. says AFP.

The spot price on the London Bullion Market stood at 320.50 dollars an ounce by lunchtime Friday, having touched 338 dollars on Tuesday, its highest poin^ since October 1997.

Dealers said gold was benefiting from mining companies that were forced to act to square hedged positions, which they had taken up when the gold price was falling.

"Gold is also benefiting from producer buy-back activity." said CRU International analyst Gillian Moncur. "Mining companies are now restructuring their hedge books in order to take into account the higher price of gold."

But prices were pegged back later in the week after Japan said that while it would not turn into a major seller of gold, it would not cling on to Its reserves at any cost.

Gold prices have surged in spectacular fashion over, the past two weeks, after 15 European central banks agreed on September 26 to curb sales and leasing of gold for the next five years.

Silver: Salvo. Silver prices slithered upwards this week due primarily to investment fund purchases.

The spot prices on the Lon-

don Bullion Market rose to 5.57 dollars an ounce from 5.22 dollars last week.

Platinum and Palladium: Up and up. The two sister metals also bobbed around in choppy trading but ended up higher.

Market operators remain nervous of output in Russia, a major producer of both precious metals, particularly as production in the country has been irregular this year.

Palladium prices on the London Palladium and Platinum Market gained 13 dollars to 390 dollars an ounce while Eilatinum prices added 32 dol-ars to 425 dollars an ounce.

Base Metals: Basement. The base metals complex slipped back this week on the London Metal Exchange (LME) in a lacklustre market devoid of new fundamentals.

The copper market was so concerned with the acquisition by US mining group Phelps Dodge of competitors Asarco and Cyprus Amax that it ignored higher stock levels.

Phelps Dodge announced the 1.1-billion-dollar acquisition of Asarco on Wednesday after snapping up Cyprus Amax last week. The moves make it the world's largest copper producer.

Grupo Mexico raised the prospect of a bidding war for Asarco by raising its own offer for the company.

The takeover struggle diverted attention away from a

market surplus of copper, as production rose to 203.000 tonnes for the first seven months of the year, according to estimates issued by International Copper Study Group.

Nickel prices fell back as the market kept a close eye on the situation at the Thompson mine in Canada's Manitoba region. where a stand-off between workers and management showed signs of thawing with a new round of talks.

Aluminium prices lost ground despite optimistic forecasts that world demand for the white metal would jump three per cent this year to 23 million tonnes.

Three-month copper prices fell by 55.5 dollars to 1.746.5 dollars per tonne. Stocks rose by 17,600 to 791.425 tonnes.

Nickel lost 240 dollars per tonne to 6,940 dollars per tonne, as stocks gained 246 tonnes to 49,782 tonnes.

Zinc shed 42.5 dollars to 1,160 dollars per tonne in spite of a slight fall in LME stocks to 289.025 tonnes.

Lead also lost ground, falling 3.5 dollars to 510 dollars per tonne, as stocks swelled 7.075 tonnes to 160.375 tonnes.

Tin was 40 dollars to the worse at 5,380 dollars per tonne, as stocks put on 875 tonnes to 10.210 tonnes.

Aluminium lost 25.5 dollars to 1,497.5 dollars per tonne. Stocks shrank by 5.075 tonnes to 791.325 tonnes.