(Updates prices, adds quotes, background)
By Lewa Pardomuan
LONDON, May 12 (Reuters) - Gold fell on Monday, giving up
overnight gains after the U.S. dollar jumped against other
currencies, but record high oil may help the metal defy declines
in demand from jewellers and other physical buyers.
Gold <XAU=> hit a high of $889.10 an ounce before slipping
to $883.10/883.80 an ounce by 1449 GMT, down from $886.30/888.30
late in New York late on Friday, when it jumped to a 10-day high
of $889.80.
"Overall, it still feels that ultimately we want to test
lower," said Simon Weeks, managing director, precious metals, at
Bank of Nova Scotia, adding that gold could fall below $845.
Gold has has lost more than 14 percent in value since
spiking to a record high at $1,030.80 an ounce on March 17. It
tumbled to a four-month low at $845 in early May.
The metal, traditionally seen as a safe haven asset in times
of uncertainty, shrugged off news that an earthquake with a
magnitude of 7.5 struck Sichuan province in southwest China and
killed up to 5,000 people [].
"We could see gold prices dip below $850, if physical demand
remains soft," said Suki Cooper, precious metals analyst at
Barclays Capital.
"But overall, a number of positive drivers are still
continuing to underpin gold prices," she said referring to
strong oil prices.
The dollar gained on Monday, aided by a slight rise in
investors' appetite for risk and growing speculation that the
current cycle of U.S. interest rate cuts may be ending.
[]
In theory, a firmer dollar reduces makes gold costlier for
holders of other currencies and reduces its appeal as an
alternative investment.
Oil <CLc1> dipped but hovered near Friday's record high
above $126 a barrel. Rising energy prices lift the metal's
appeal as a hedge against inflation.
"What is supporting gold very significantly on the downside
right now is crude oil prices," said Walter De Wet, precious
metals analyst at Standard Bank.
"At current levels, it's likely that we might see some
physical gold buying again coming into the market. We have
obviously seen it drying up at around about $959-$960."
DEFENSIVE TRADING
Gold slipped below $900 in late April and has since shown
little resilience.
"Given the metal's reaction to pockets of dollar strength,
it seems gold will find it tough to rally significantly," said
James Moore, precious metals analyst at TheBullionDesk.com.
In other markets, most active June gold futures contract
<GCM8> on the COMEX division of the New York Mercantile Exchange
fell $1.9 to $883.9.
Spot platinum <XPT=> rose to $2,077.50/2,097.50 an ounce
from $2,074.00/2,094.00 in New York on Friday, when it rose to
$2,095, the highest since March 17, as the launch of U.S.
platinum exchange-traded notes boosted sentiment.
Silver <XAG=> edged up to $16.95/17.01 an ounce from
$16.82/16.88 late on Friday. Palladium <XPD=> rose to
$437.00/445 an ounce from $432/440.
(Additional reporting by Atul Prakash in London and Risa Maeda
in Tokyo)
(Editing by Nigel Hunt)
