UPDATE 6-Gold pares losses on safe-haven buying

                                
 (Updates with New York closing prices, market activity)
                                
 By Atul Prakash
                                
 LONDON, Jan 23 (Reuters) - Gold pared most of its losses in
volatile trade on Wednesday on safe-haven buying and bargain
hunting at lower price levels, traders said.
                                
 Longer-term sentiment remained strong and the metal was
expected to exceed this year's historic highs of $914 an ounce.
                                
 Gold <XAU=> fell as low as $876.40 an ounce before climbing
to a session peak of $895.60. The metal was quoted at
$884.75/885.45 by New York's last quote at 2:15 p.m. EST (1915
GMT).
                                
 It closed at $890.30/891.00 in New York on Tuesday, when
prices tumbled to a three-week low of $849.50 before a surprise
rate cut by the U.S. Federal Reserve sparked a comeback rally.
                                
 The active gold contract for February delivery at the COMEX
division of the New York Mercantile Exchange <GCG8> settled
down $7.20 at $883.10 an ounce after peaking at $896.50.
                                
 "Initially we saw it off with weaker stocks. Although there
may be some flight-to-cash selling around, increasingly people
need some kind of safe haven to cling to," said Simon Weeks,
director of metals trading at Bank of Nova Scotia.
                                
 "I think the dip to $850 was your last chance for a while to
buy some 'cheap' stuff."
                                
 Gold, which moved in a range of more than $40 on Tuesday,
has lost nearly 3 percent since hitting a record high of $914
earlier this month, as sliding energy and global equity prices
forced investors to sell the metal to cover margin calls.
                                
 "Gold prices benefited from yesterday's rate cut, and
further cuts in addition to inflationary fears and concerns
about growth of the economy are likely to buoy prices in
forthcoming months," said Suki Cooper, analyst at Barclays
Capital.
                                
 "But we would not rule out a short-term price correction."
                                
 A Reuters global poll of 50 traders and analysts showed
average gold prices will surge more than 20 percent this year
and retain most gains in 2009 as dollar weakness, market
turmoil and inflation fears stoke investor interest.
[ID:nL22651372]
                                
 OIL PRICES WEIGH
                                
 But analysts said weaker oil prices might weigh on the
metal, traditionally seen as a hedge against oil-led inflation,
in the coming days.
                                
 Oil fell below $88 a barrel as stock markets fell further,
shrugging off a temporary reprieve from Tuesday's steep cut in
U.S. rates amid persistent fears of a global economic slowdown.
                                
 Britain's leading shares slipped more than 2 percent, while
U.S. stocks cut losses but were still lower on recession
worries.
                                
 "From here, gold's correction appears to have run its course
for now, although if the dollar is set to rally ... then the
metal could come under renewed pressure soon," said John Reade,
head of metals strategy at UBS Investment Bank.
                                
 "We hold our one-month forecast of $850/oz."
                                
 In other markets, the benchmark gold futures contract
<0#JAU:> on the Tokyo Commodity Exchange rose by the daily 120
yen per gram limit after the Fed's rate cut lifted sentiment.
                                
 South Africa surrendered its crown as the world's biggest
gold producer last year to China, marking a changing of the
guard and confirming analysts' concerns about the country's
dwindling ore grades. [ID:nL2298502]
                                
 Freeport-McMoRan Copper & Gold Inc <FCX.N> said on
Wednesday quarterly profit fell slightly as rising costs erased
gains from sharply higher copper output and prices. It also
trimmed its copper and gold forecast. [ID:nN23399828]
                                
 On the legal front, a bill passed by the U.S. House of
Representatives last year that would impose stiff new royalties
on hardrock mining companies will likely be toned down by the
Senate, where pro-mining lawmakers hold more sway.
                                
 If it becomes law, it would be the first major overhaul of
the General Mining Law since President Ulysses S. Grant signed
it 136 years ago to encourage Western land development.
[ID:nN23633354]
                                
 Platinum <XPT=> was down $2 at $1,549.50/1,554.50 an ounce,
but off Tuesday's one-month low of $1,507 an ounce.
                                
 In industry news, Anglo Platinum <AMSJ.J> said that
flooding had disrupted production at its Amandelbult mine,
which was expected to produce 50,000-70,000 ounces of refined
platinum this year. [ID:nWEA7461]
                                
 It said output at the mine had been reduced to 25 percent
of normal capacity and may take nine to 12 weeks to restore.
                                
 Silver <XAG=> was at $15.91/15.96 an ounce, versus
$16.01/16.06 late in New York on Tuesday, while palladium
<XPD=> edged down to $362.50/367.50 an ounce from its previous
close at$366.50/371.50.
 (Additional reporting by Frank Tang in New York and Lewa
Pardomuan in Singapore, editing by Matthew Lewis)