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By Atul Prakash
LONDON, March 25 (Reuters) - Gold rebounded on Tuesday after
the dollar resumed its downward trend, but weaker oil prices
reduced the metal's appeal as a hedge against inflation and
capped gains, analysts said.
Investors were cautious after their confidence was shaken by
a recent sell-off in commodities, with gold falling more than 10
percent last week since spiking to a record high of $1,030.80 an
ounce on March 17.
Platinum has fallen more than 20 percent from this month's
record high of $2,290 before marginally recovering, silver has
slipped 20 percent from a 27-year high and palladium has
plummeted nearly 30 percent before moving higher.
Gold <XAU=> touched a low of $911.50 an ounce on Tuesday
before hitting a high of $935.70. It was at $930.40/931.30 by
1500 GMT, against $920.90/921.70 in New York late on Monday.
"We see some consolidation in the market between $910 and
$950, but the potential clearly remains on the upside," said
Frederic Panizzutti, analyst at MKS Finance.
"Any continuation in the dollar's downside trend would
enable gold to move towards the upper side of the range and
possibly break it, but after the massive price correction, the
market would be cautious."
The dollar extended losses against the euro after U.S.
consumer confidence hit a five-year low in March. The currency
fell broadly, snapping four days of gains, with nerves over the
health of the U.S. economy dominating sentiment.
The dollar tumbled to a record low against the euro last
week when the announcement of U.S. bank Bear Stearns' <BSC.N>
takeover at a rock-bottom price stoked fears that other major
financial firms could be casualties.
A weaker dollar makes gold cheaper for holders of other
currencies and often lifts bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
"Gold is up today on bargain-hunting after the heavy losses
of last week. A softer dollar is also encouraging buyers to
return to the market," said David Thurtell, analyst at BNP
Paribas.
"Weaker longs have been cleaned out, so we expect some
consolidation at these levels. The next major signposts for gold
will be U.S. ISM and non-farm payrolls figures next week," he
said, referring to the Institute for Supply Management data.
OIL PRESSURE
Gold was under pressure from oil, which handed back early
gains to fall for the fourth straight day. Concerns over
weaker demand in the United States, the world's top consumer,
extended a retreat that has knocked a 10th off prices since last
week.
"The market seems to be cautious after a massive crash and
this fear to re-enter the market is likely to disappear as gold
continues to stay above key supports," said Pradeep Unni,
analyst at Vision Commodities in Dubai.
"We reiterate that fundamentals of gold that have been
supporting its rally for the last eight years and more haven't
changed in the last week's fall. Seldom do we get an opportunity
to buy a commodity 10-12 percent cheaper in a bull market."
In other markets, U.S. gold futures for April delivery
<GCJ8> rose $16 an ounce to $934.70, but off a record high of
$1,033.90 an ounce hit last week.
Platinum <XPT=> rose more than 3 percent to $1,943/1,953 an
ounce after falling as low as $1,865, against $1,880/1,890 late
in New York.
"Despite ongoing long liquidation from speculative type
players, supply disruptions in South Africa and strong
investment demand will continue to underpin the platinum market,
which will see a substantial supply deficit this year,"
TheBullionDesk.com said in a daily note.
Palladium <XPD=> rose to $442/447 an ounce from $427/432,
while silver <XAG=> was up at $17.42/17.47 an ounce from
$16.95/17.00 in the U.S. market late on Monday.
(Reporting by Atul Prakash; editing by Elizabeth Piper)
