(Recasts, adds analyst comments, closing prices, adds NEW YORK
to dateline)
By Frank Tang and Pratima Desai
NEW YORK/LONDON, April 16 (Reuters) - Gold rose more than 2
percent on Wednesday, spurred by record oil prices and 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 level
since March 28, and was at $943.90/944.70 by New York's last
quote at 2:15 p.m. EDT (1815 GMT), compared with $927.60/928.40
in New York late on Tuesday.
The active U.S. contract for June delivery <GCM8> on the
COMEX division of the New York Mercantile Exchange settled up
$16.30, or 1.8 percent, at $948.30 an ounce.
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 hit a session high of $1.5977 <EUR=>.
"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.
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.
"It's been doing some good consolidation recently. The
market really seemed like had it washed out. It looks to be
heading to at least up to the $960 area in the near term," said
Stephen Platt, analyst with Archer Financial Services in
Chicago.
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.
However, Cooper said she expected gold could trade in
consolidation mode between $900 and $940 in the near term.
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
U.S. crude futures <CLc1> hit a record high above $115 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 at $18.31/18.36 an ounce, up from its
previous finish of $17.79/17.84 on Tuesday, palladium <XPD=> was
firmer at $455/460 from $447/452 and platinum <XPT=> gained to
$2,015/2,025 an ounce from $1,970/1,980 last in the U.S. market
on Tuesday.
(Additional reporting by Alastair Sharp and Daniel Magnowski in
London, editing by Matthew Lewis)
