By Atul Prakash
LONDON, March 12 (Reuters) - Gold gained on Wednesday on a
struggling dollar and strong oil prices, and analysts said the
metal was expected to trade in range in the near term.
Spot metal <XAU=> rose as high as $977.00 an ounce before
dipping to $975.50/976.30 at 1030 GMT, against $971.00/971.80
late in New York on Tuesday.
Gold fell as low as $964.35 on Tuesday, when the dollar
rallied after global central banks announced plans to boost
liquidity in financial markets.
"There is a lot of investor interest in gold right now and
investor sentiment is the key driver for gold prices, but
physical demand holds them down," said Dan Smith, metals analyst
at Standard Chartered Bank.
"We expect a broad sideways move in gold prices in the
coming months, though long term we are still quite bullish."
Gold is still up nearly 17 percent since the start of the
year, a rally that has dimmed physical buying in key consuming
centres, although this week's consolidation around $970 has
stirred demand from jewellers in some parts of the world.
The metal was getting support from the dollar, which eased
back towards record lows versus the euro as a pick-up in risk
appetite prompted by central bank measures to boost liquidity
faded.
On Tuesday the Federal Reserve lifted short-term funding to
primary dealers to $200 billion and allowed them to use a wider
array of mortgage debt as collateral. Central banks in the euro
zone, Britain, Canada and Switzerland also took action.
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.
Oil traded just below record highs near $110 overnight.
POSITIVE FACTORS
"The factors that have led to the recent gold price rally
remain in place. Global inflation risks are high as WTI crude
oil prices have consolidated above $105 a barrel. This should
provide support to precious metals," Standard Bank said.
Gold has fallen more than 2 percent since it spiked to a
lifetime high of $991.90 on March 6, but dealers said record
high oil prices and expectations of further interest rate cuts
in the United States were keeping further losses at bay.
"Gold is likely to find strong dip buying interest, however
the metal's failure to rally above $985 suggests the metal is
still top heavy and in need of further consolidation," James
Moore, analyst at TheBullionDesk.com, said in a market note.
In other metals, platinum <XPT=> fell as low as $2,003 an
ounce before rising to $2,042/2,052, against $2,050/2,060 late
in New York and a record high of $2,290 hit on March 4.
The metal has risen as much as 50 percent in 2008.
"Platinum prices look set to remain at high levels in the
absence of significant new platinum production from South Africa
or elsewhere," Fairfax investment bank said in a daily report.
Silver <XAG=> rose to $19.75/19.77 from $19.61/19.66 an
ounce in New York, while palladium <XPD=> was marginally down at
$484/489 an ounce, versus $486/491 in the U.S. market.
(Additional reporting by Anna Ringstrom in London)
(Editing by Peter Blackburn)
