(Recasts, updates with closing prices, market activity, adds
NEW YORK to dateline)
By Frank Tang and Atul Prakash
NEW YORK/LONDON, March 10 (Reuters) - Gold ended higher
after initially falling on Monday, as record high oil prices
and a weak dollar attracted speculators and investors back into
the bullion market.
Palladium finished lower after falling nearly 6 percent to
a three-week low, while platinum trimmed losses but still ended
lower after sliding about 5 percent to its lowest level in one
month.
Analysts said gold was likely to trade in a range ahead of
a U.S. Federal Reserve meeting next week, but expectations of
further interest rate cuts in the United States were likely to
support the market over the medium to long-term.
Spot gold <XAU=> fell as low as $961.00 an ounce and was at
$974.10/974.90 at 2:15 p.m. EDT (1815 GMT), against
$972.60/973.40 late in New York on Friday.
The active U.S. gold contract for April delivery <GCJ8>
settled down $2.40 at $971.80 an ounce, after bottoming at
$961.90 earlier.
"The market was feeling a bit toppish, but now with oil
trading at around $107 a barrel, people are regretting their
sales and tip-toeing back to gold for sure," said David Holmes,
director of metals sales at Dresdner Kleinwort.
"The market is characterised by volatility. A lot of the
price action is speculative and people are quick to get in and
out of the market at the moment."
Record-high crude oil prices powered gold as a hedge
against inflation. U.S. crude futures <CLc1> settled up $2.75
to $107.90 a barrel, after rising to an all-time high of
$108.21 earlier.
Gold is generally seen as a hedge against oil-led
inflation. The metal also often moves in the opposite direction
to the dollar as a weaker U.S. currency makes the metal cheaper
for holders of other currencies and lifts bullion demand.
The dollar marginally fell against the euro after rising.
"The upward trend is still in place. People are just
waiting for something to take it up towards $1,000 or maybe
above it," said Michael Widmer, metals analyst at Lehman
Brothers.
"I wouldn't be surprised if prices didn't do a lot ahead of
the next week's Fed meeting and, the closer we get, the less
likely that people are to take big positions."
CONSOLIDATION PHASE
Players were cautious as the Fed meeting would give a lot
of information on issues such as the U.S. interest rate outlook
and the health of the U.S. economy, Widmer said.
Gold hit an historic high of $991.90 an ounce on March 6
before funds cashed in. The metal had gained nearly 20 percent
in 2008, on the top of a 32 percent rise last year.
"The metal's failure to break higher on Friday suggests the
market may, just for the short-term, be in need of a phase of
consolidation before challenging $1,000," said James Moore,
precious metals analyst at TheBullionDesk.com.
In industry news, South Africa's Chamber of Mines said the
country's gold production fell 7.4 percent to 254,685 kg in
2007 mainly because of lower ore grades as well as
safety-related mine closures. []
Platinum retraced initial losses after suffering heavily on
news that mines in South Africa, the world's top producer,
would get 95 percent electricity supply against 90 percent.
"What undermined platinum was Eskom's announcement that it
would raise power supply to South African mines to 95 percent,"
Holmes of Dresdner said, adding the market was extremely long
and that the news had prompted sales.
Platinum <XPT=> fell to a low of $1,926 an ounce and was
last at $1,980/1990, lower than its Friday finish of
$2,020/2,030 in New York. The metal has fallen 16 percent in
less than a week after hitting a record high of $2,290 on March
4.
Palladium <XPD=> was at $467/472 an ounce after falling to
a low of $457, against $485/490 in New York, while silver
<XAG=> fell as low as $19.19 an ounce and was last at
$19.64/19.69, against $20.11/20.16, its previous close on
Friday.
