(Recasts, adds analyst comments, closing prices, adds NEW YORK
to dateline)
By Frank Tang and Lewa Pardomuan
NEW YORK/LONDON, May 12 (Reuters) - Gold ended lower on
Monday, giving up overnight gains due to retreating crude
prices, but a further oil rally may help bullion defy declines
in demand from jewelers and other physical buyers.
Meanwhile, silver finished nearly 2 percent higher in spite
of gold's decline, as buy-stops accelerated gains after prices
breached above resistance level, floor traders said.
Gold <XAU=> hit a high of $889.10 an ounce before slipping
to $884.60/886.00 an ounce by New York's last quote at 2:15 p.m.
EDT (1815 GMT), down from $886.30/888.30 in New York late on
Friday, when it jumped to a 10-day high of $889.80.
Gold 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.
U.S. crude futures <CLc1> ended down nearly $2 at just
above $124 a barrel after initially setting a record high of
$126.40 a barrel.
James Steel, metals analyst at HSBC in New York, said that
oil's weakness was a dominating factor for gold's decline amid
quiet trade.
Steel said the future direction of crude oil could still
definitely influence the price outlook of gold.
In the past two months, gold prices have failed to move
higher in spite of a sharp rally of crude oil to record peaks.
Rising energy prices usually lift the metal's appeal as a
hedge against inflation.
"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.
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 gave back initial strength to trade lower
against the euro, failing to give bullion investors a clear
trading signal.
In theory, a firmer dollar reduces makes gold costlier for
holders of other currencies and reduces its appeal as an
alternative investment.
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, the most-active June gold futures contract
<GCM8> on the COMEX division of the New York Mercantile Exchange
settled 90 cents lower at $884.90 an ounce.
Spot platinum <XPT=> rose to $2,092.50/2,102.50 an ounce
from $2,074.00/2,094.00 late 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 by UBS Investment Bank boosted
sentiment. []
Silver <XAG=> jumped to $17.12/17.20 an ounce from
$16.82/16.88 late on Friday in the U.S. market. Palladium
<XPD=> rose to $437.00/445 an ounce from its previous finish of
$432/440.
(Additional reporting by Atul Prakash in London and Risa Maeda
in Tokyo, editing by Matthew Lewis)
