(Updates prices)
By Atul Prakash and Bate Felix
LONDON, March 28 (Reuters) - Gold fell more than 2 percent
in a broad commodities sell-off on Friday, with a rise in the
dollar and softer oil prices dampening the metal's allure as an
alternative investment.
Other key precious metals, base metals and major soft
commodities traded lower, with investors pocketing profits
before the end of the quarter.
Gold <XAU=> fell to $926.50 before rising to $933.30/934.20
an ounce at 1540 GMT, against $951.80/952.60 in New York late on
Thursday. Last week, it hit a record high of $1,030.80 an ounce
before tumbling to a one-month low of $904.70.
"The market is really correcting itself, but it's a general
move out of commodities. It's not just gold," said Jeremy East,
head of metals trading at Standard Chartered Bank.
The market witnessed a heavy sell-off last week before
rebounding on technical buying. Now it was witnessing a
continuation of the downward trend, with people liquidating
their positions and running for cash, East said.
"But I don't think the bullish trend is over. There is still
buying interest, but in the short term the market has probably
overdone on the upside. We are in a consolidation phase and gold
may break back down below $900 again."
The dollar edged higher but hovered not far from record lows
against the euro after U.S. data showed inflation pressures were
tame in February, affirming expectations of further interest
rate cuts by the Federal Reserve to boost a weakening economy.
A firmer dollar makes gold costlier for other currency
holders and often lowers demand. Lower oil prices reduce the
metal's appeal as a hedge against inflation.
Oil fell more than $2 to near $105 a barrel as crude flows
through Iraq's pipeline system were restored after disruption by
a bomb attack on Thursday.
"I would expect gold to continue bouncing around in the
range of about $955 on the upside and down to about $915," said
Tom Kendall, metals strategist at Mitsubishi Corporation.
"It's going to take until the second half of the next week
before the market is going to be ready to make a more convincing
push upward again."
U.S. gold futures for April delivery <GCJ8> fell $16.6 an
ounce to $932.20 -- off last week's record of $1,033.90.
LONG-TERM POSITIVE
Analysts were positive on the metal's outlook in the medium
to long term.
"The sudden price pull-back across the precious metal
complex during March has raised concerns that the bull run in
this sector has drawn to a close. We disagree," said Michael
Lewis, global head of commodities research at Deutsche Bank.
"We believe weakness in the U.S. dollar has not been
exhausted and with U.S. real interest rates expected to move
deeper into negative territory, we are maintaining our bullish
outlook towards gold and silver prices," he said in a report.
In other metals, spot platinum <XPT=> rose to a one-week
high of $2,040 an ounce before falling to a low of $1,980. It
was last at $2,010/2,020, versus $2,023/2,033 in New York. It
struck a record high of $2,290 on March 4 on supply fears driven
by mining disruptions in top producer South Africa.
Platinum gained around 50 percent in 2008 after a power
crisis in South Africa forced gold and platinum mines to shut
down for five days in January, driving platinum prices.
But the metal, mainly used in jewellery and auto catalysts
to clean exhaust fumes, tumbled to a six-week low at $1,805 an
ounce last week.
Silver <XAG=> fell to $17.93/17.98 from $18.50/18.55 an
ounce -- off a 27-year high of $21.24 hit on March 17. Palladium
<XPD=> dipped to $439/446 an ounce from $445/450.
(Reporting by Atul Prakash; editing by Chris Johnson)
