(Updates prices)
By Pratima Desai
LONDON, April 16 (Reuters) - Gold rose more than 2 percent
on Wednesday, spurred by the dollar's tumble to record lows
against the euro after poor economic data from the United
States, analysts said.
Spot gold <XAU=> hit $948.90 per ounce, its highest since
March 28, and was quoted at $946.40/947.20 at 1526 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 fell to a two-month
low of $872.90 in early April.
The dollar extended losses versus the euro after a pair of
economic reports showed lower-than-expected inflation last month
and a sharp fall in housing starts, suggesting more Federal
Reserve interest rate cuts ahead.
By contrast, record high euro zone inflation data confirmed
a view that the European Central Bank was unlikely to cut
interest rates in the near future, which sparked a bout of euro
buying. The euro was at $1.595 <EUR=> by 1530 GMT.
"Markets are anticipating there's room for more interest
rate cuts in the U.S. as opposed to in the EU by the ECB, which
ultimately supports more dollar weakness against the euro," said
Walter de Wet, Head of Commodities Research at Standard Bank in
Johannesburg.
Concerns that the quarterly reporting season would reveal
fresh asset writedowns at U.S. investment banks also prompted
investors to sell the dollar, 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.
News that foreign purchases of U.S. corporate bonds surged
in February helped relieve some 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 $18.37/18.42 an ounce, up from
$17.79/17.84 on Tuesday, palladium <XPD=> was firmer at $459/464
from $447/452 and platinum <XPT=> gained to $2,020/2,030 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.
(Additional reporting by Alastair Sharp and Daniel Magnowski,
Editing by Peter Blackburn)
