(Updates with quotes, prices)
By Atul Prakash
LONDON, April 2 (Reuters) - Gold rebounded on Wednesday to
trade in a tight range after a sharp drop in prices to two-month
lows in the previous session encouraged bargain hunters and
investors to snap up the metal.
But analysts said the broad commodities sell-off in recent
days had damaged near-term sentiment and bullion investors would
be cautious in chasing the metal higher ahead of U.S. payrolls
data on Friday that could influence the dollar.
"We are trying to recover some ground and may succeed
depending on the data releases in the U.S., but that could be
temporary respite," said Tom Kendall, metals strategist at
Mitsubishi Corporation.
"It's too early to be wholly convinced that the time is
right to go long again for strategic investors. The market needs
to steady for a while and it's possible that we will set up a
range here between $875 to $900 for a week or two."
Gold <XAU=> hit a high of $894 and was at $888.20/889.10 at
1440 GMT, against $884.20/885.40 in New York late on Tuesday,
when it fell as low as $872.90.
A decline of 3 percent on Tuesday took overall losses to
15 percent since gold hit a record high of $1,030.80 last month,
making bullion attractive for physical dealers.
"Looking ahead, Friday's U.S. non-farm payroll data is set
to be an important indicator of the state of the U.S. economy,"
Standard Bank said in a report.
"A figure much higher than expected could see the dollar
extending its recent gains against the euro. However, if it
appears that the U.S. is still struggling to create jobs, it
could lead to renewed dollar weakness on the back of expectations
of further aggressive Fed rate cuts."
The dollar rose against the euro after a report showed U.S.
private employers unexpectedly added to payrolls in March,
stoking some optimism about the health of the U.S. economy.
The dollar was also bolstered by a report that euro-zone
leaders would probably raise concerns about what they see as the
excessive strength of their currency at a Group of Seven meeting
on April 11, according to EU sources. [].
Gold often moves in the opposite direction of the dollar.
MARKET OUTLOOK
Analysts were positive about gold's outlook.
"Gold is looking decent here. I'm not convinced the worst is
over for either the credit market crisis or the U.S. economic
slowdown," said David Thurtell, metals analyst at BNP Paribas.
"U.S. jobs data will be crucial for the market. Poor numbers
would see renewed U.S. dollar weakness and gold may push back
over $920," he said.
In other precious metals markets, U.S. gold futures for June
delivery <GCM8> on the COMEX division of the New York Mercantile
Exchange rose $0.8 an ounce to $888.60.
Spot platinum <XPT=> rose 1.6 percent to a high of $1,948 an
ounce before falling to $1,928/1,938, still up from $1,918/1,928
on Tuesday, when it fell to a low of $1,888.
Platinum has fallen more than 15 percent since hitting a
record high of $2,290 on March 4 on production problems in South
Africa, the world's top producer of the metal, following an
electricity supply crisis.
State power utility Eskom said on Wednesday that South
Africa's power crisis may last many years unless there was a
sustained drop in electricity demand in the country.
The warning came as Eskom, which produces about 95 percent
of the nation's electricity, resumed a wave of planned power
cuts and South Africans grew increasingly impatient with an
energy crunch that has shaken industry and investor confidence.
Silver <XAG=> inched higher to $16.87/16.92 an ounce from
$16.81/16.86 on Tuesday, when it hit a two-month low of $16.32,
while palladium <XPD=> was flat at $435/450 an ounce.
(Reporting by Atul Prakash; editing by Elizabeth Piper)
