(Recasts with comment/detail, changes dateline, pvs SINGAPORE)
By Pratima Desai
LONDON, April 16 (Reuters) - Gold rose on Wednesday, spurred
by the dollar's tumble to record lows against the euro, oil at
all-time peaks and market worries about financial stability.
Spot gold <XAU=> was at $934.70/935.40 a troy ounce at 1022
GMT compared with $927.60/928.40 in New York late on Tuesday. It
hit a record high of $1,030.80 an ounce on March 17, but tumbled
to a two-month low of $872.90 in early April.
Record high euro zone inflation data confirming a view that
the European Central Bank was unlikely to cut interest rates in
the near future sparked a bout of euro buying, which took the
dollar to almost $1.60.
Concerns that the quarterly reporting season would reveal
fresh asset writedowns at U.S. investment banks also prompted
investors to sell the dollar <EUR=>, which boosted sentiment in
the bullion markets.
"The overall environment remains very positive for gold
because the dollar is so weak, oil prices buoyant and there is
concern about financial markets," said Suki Cooper, analyst at
Barclays Capital.
"In the near term, I think gold will trade in consolidation
mode between $900 and $940."
A weaker U.S. currency makes dollar-denominated metals
cheaper for holders of other currencies, while gold is seen as a
hedge against inflationary pressures, often triggered by rising
oil prices.
SUBSTITUTE CURRENCY
Crude <CLc1> hit a record high above $114 a barrel as
investors piled in, using oil as a substitute currency for the
dollar, which is expected to suffer more losses on further rate
cuts by the U.S. Federal Reserve.
However, that notion could be sidelined later on Wednesday
if data on inflation in the United States convinces the market
that rate cuts won't be as aggressive as had been expected.
"That idea would give the dollar a lot of support and you
may see a sell-off," a London-based trader said. "But inflation
is going up everywhere ... Gold will gain from that."
News foreign purchases of U.S. corporate bonds surged in
February, did help to relieve some of the nervousness about the
stability of U.S. financial markets.
"Rising capital inflows may indicate that foreign investors
are beginning to believe that the worst of the credit crunch is
over, at least for the U.S." HSBC said in a note.
That could exert downward pressure on gold if the dollar
stages a recovery, however minor.
Silver <XAG=> was up at $18.00/18.05 an ounce, up from
$17.79/17.84 on Tuesday, palladium <XPD=> firmer at $455/460
from $447/452 and platinum <XPT=> gained to $1,990/2,000 an
ounce from $1,970/1,980.
Analysts expect platinum prices to be underpinned by supply
disruptions in South Africa, the world's largest producer, where
the state power utility cannot meet growing demand.
(Editing by Chris Johnson)
