(Recasts, adds analyst comment, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Atul Prakash
NEW YORK/LONDON, April 28 (Reuters) - Gold ended higher on
Monday as oil hit a record high and physical demand rebounded,
but investors remained cautious ahead of this week's meeting of
the U.S. Federal Reserve on interest rates.
Bullion <XAU=> rose as high as $895.80 an ounce and was at
$891.65/892.65 by New York's last quote 2:15 p.m. EDT (1815
GMT), against $886.90/888.30 in New York late on Friday.
U.S. gold futures <GCM8> for June delivery on COMEX division
of New York Mercantile Exchange settled up $5.80 at $895.50 an
ounce.
Gold was supported by strong oil prices, but analysts said
bullion's upward movement was not as impressive as last month
when soaring oil and a record low dollar propelled gold to a
lifetime high of $1,030.80 on March 17.
"Sentiment towards gold is not nearly as bullish as it was,
not least because the outlook for the dollar is considerably
less bearish," said Tom Kendall, metals strategist at Mitsubishi
Corporation.
"If we get more positive U.S. data this week that surprises
on the upside, or if the tone of the statement following the Fed
meeting gives people confidence that it has come to the end of
its interest rate easing cycle, then it would not be surprising
to see gold pushed lower."
The metal has fallen 13 percent since then and has been
struggling to regain $900. It hit a three-week low of $877.60 on
Friday before a surging oil market lifted gold's appeal as a
hedge against inflation.
Oil hit a record near $120 a barrel, boosted by a string of
bullish factors including disruption of Nigeria's output and a
UK refinery strike, highlighting anxieties over supplies. U.S.
crude futures <CLc1> settled up 23 cents at $118.75 a barrel.
"I do expect gold to drift around $900 for a little while,
until we really see another strong shift in sentiment. Even the
spike in oil is failing to really fire up the gold market," said
Daniel Hynes, metals strategist at Merrill Lynch.
"After such a good run, a lot of people took the opportunity
to liquidate, but the general trend would be for rising prices
in the medium- to long-term," he said.
FED MEETING AWAITED
In the currency market, the dollar marginally fell against
the euro ahead of the Federal Reserve's meeting on Wednesday.
The Fed has slashed borrowing costs in response to the
credit crisis that erupted last year, but some speculate that
climbing fuel and food prices could prevent any more big cuts.
A rate cut tends to weaken the dollar and lift gold demand,
as the metal is seen as an alternative investment and often
moves in the opposite direction of the U.S. currency.
"Gold's still trying to find a base here. It's taking
direction from the dollar," said one New Jersey-based trader.
The trader said that robust physical buying from Asia had
boosted gold prices, especially during the Asian trading hours.
Gold should remain supported provided that Asian physical demand
remained strong, he said.
In other metals, platinum <XPT=> rose to $1,964/1,974 an
ounce from $1,944/1,964 late on Friday and silver <XAG=> gained
to $16.95/17.05 an ounce from its precious finish of
$16.83/16.89. But spot palladium <XPD=> fell $2 to
$433.50/439.50 an ounce.
(Editing by Matthew Lewis)
