(Recasts, updates prices and comments)
By Atul Prakash
LONDON, May 28 (Reuters) - Gold bounced off an earlier
two-week low on Wednesday, as oil reversed its losses,
highlighting the metal's appeal as a hedge against the
inflation, dealers said.
Gold <XAU=> was at $901.70/902.70 an ounce by 1437 GMT,
after falling about 2 percent to a two-week low of $889.35 an
ounce. The market, however, remained down from $907.10/908.30 in
New York late on Tuesday.
"Gold bounced back because oil's somewhat stronger," said
metals analyst Michael Widmer at Lehman Brothers.
Other precious metals followed gold. Platinum trimmed some
its losses after slipping more than 3 percent, while silver
edged higher, reversing earlier gains of almost 2 percent.
U.S. crude futures <CLN8> bounced off support just below
$126 and rallied more than $1 to near $130 a barrel amid signs
Asian demand could start to falter as consumer nations look to
cut subsidies by raising fuel prices.
Gold tends to move in line with oil prices as it boosts
bullion's appeal as a hedge against the inflation. But the metal
remained vulnerable as it followed volatile crude prices.
Currency markets did not offer much support as the dollar
rose after a report showed new orders for U.S. durable goods
fell by less than expected in April, supporting the view the
Federal Reserve may keep interest rates on hold.
Gold often moves in the opposite direction of the dollar.
PLATINUM WEAKER
In other bullion markets, U.S. gold futures for June
delivery <GCM8> fell to $9.0 to 898.90 an ounce.
China, the world's second-largest gold producer last year,
is expected to surpass South Africa and become the world's top
producer in 2008 as it raises output from 270.5 tonnes to 300
tonnes this year.[]
In other precious metals, spot platinum <XPT=> fell to a
two-week low $2,035.50/2,055.50 an ounce and was last at
$2,044/2,064 versus $2,118/2,138 late in New York on Tuesday.
Platinum futures in Japan also declined sharply, with the
most active April contract <0#JPL:> falling a daily-limit of 300
yen and settling at the day's low of 6,740 yen.
The metal's major industrial use is in catalysts,
particularly in diesel catalysis, to help clean environmentally
damaging fumes from motor exhausts.
"We still expect dips to be viewed as buying opportunities,
given the tight market fundamentals and likelihood of further
investment demand/supply disruptions," James Moore, precious
metals analyst at TheBullionDesk.com, said.
Silver <XAG=> fell as low as $17.09 an ounce and was last
quoted at $17.50/17.55, versus $17.41/17.47 late on Tuesday.
Palladium <XPD=> was at $432/$440 an ounce, down from
$436.50/444.50.
(Additional reporting by Humeyra Pamuk and Karl Plume in London
and Maryelle Demongeot in Singapore)
(Reporting by Atul Prakash; editing by Nigel Hunt)
