The Coming Week in Europe: Going, Going ... Gold!

The Bank of England's upcoming gold auction will likely worsen the already-grim fate of the precious metal.
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Where's

Mr. T

when global commodities traders need him?

Alas, not even the well-adorned Mr. T and his healthy appetite for gold would be able to save the plummeting fortunes of the precious metal as the

Bank of England

carries out the second of five auctions planned to liquidate over half of the central bank's gold reserves.

Tuesday's auction of 25 tonnes of gold may be relatively small compared with the overall amounts produced annually, but the move is sure to keep downward pressure on prices. The British government decided in May to sell off 415 tonnes of its total of 715 tonnes of reserves, in order to invest the funds in dollar-, euro- and yen-denominated government bonds.

While that raised concerns that other central banks might follow suit, the Bank of England's first auction in July alone was enough to cause the price of gold prices to hit its lowest point in 20 years.

"Gold has made several attempts to breach upside resistance at $257 per ounce, but the market's preoccupation with the Bank of England auction continues to dent sentiment," says Malcolm Southwood, an analyst for

J.B. Were & Son

in London. "With just a few days to go, few players will be willing to take long positions."

But the Bank of England's auction won't be the only blot on the landscape for gold traders, as there is also a slew of economic data that is likely to show there's no need to buy gold as a hedge against inflation any time soon.

Italy will kick things off on Monday with figures for August consumer prices. On Friday Germany will release preliminary consumer prices for September and on the same day Italy will publish September inflation data for the country's major cities. Also sometime during the week German August producer and import prices are to be released.

Also of note on the economic front is the Tuesday report on West German business confidence by the Munich-based

Ifo

research institute. The indicator has been used in recent months to point to a quickening recovery for Europe's largest economy.

For the equity markets, shares of retailers could prove of interest, after Germany's

Tengelmann Group

said it was looking for strategic partners to expand its business. The announcement could help spur the consolidation of the sector, in the wake of domestic mergers and moves by

Wal-Mart

(WMT) - Get Report

to increase its holdings in Europe.

The telecommunications sector continues to hold many people's attention following the news last week that

AT&T

(T) - Get Report

and

British Telecommunications

(BTY)

plan to set up a transatlantic mobile phone alliance.

Besides likely striking fear into the hearts of continental telecos such as

Deutsche Telekom

(DT) - Get Report

or

France Telecom

(FTE)

, the AT&T-BT deal should spur discussions between the U.K.'s

Vodafone AirTouch

(VOD) - Get Report

and

Bell Atlantic

(BEL)

for a common mobile telecommunications unit.

With transatlantic calls becoming that much cheaper and easier, perhaps Mr. T may find the time to pick up the phone and tell Bank of England Governor

Eddie George

he is a "fool" for cheapening of his vast holdings of gold chains and jewelry.