(Updates with quotes, prices)
By Atul Prakash
LONDON, April 25 (Reuters) - Gold rose nearly 1 percent on
Friday, rebounding from three-week lows as weaker prices
attracted bargain hunters and a recovery in oil lifted bullion's
appeal as an inflation hedge.
But gold <XAU=> was expected to face downward pressure again
after falling nearly 15 percent from last month's record high.
Near-term sentiment had also turned bearish it broke its 100-day
moving average of just above $900 an ounce this week, they said.
Spot metal <XAU=> fell as low as $877.60 an ounce before
rising to a high of $896.50. It was quoted at $887.50/888.50 at
1413 GMT, against $885.25/886.45 in New York late on Thursday.
Gold futures for June delivery <GCM8> on the COMEX division
of the New York Mercantile Exchange was up $4.30 an ounce to
$893.70 an ounce.
"Firm oil is leading gold higher again and the euro is also
enjoying a small rebound," said Tom Kendall, metals strategist
at Mitsubishi Corp.
"June U.S. gold futures managed to bounce just ahead of key
support at $877 and that may have given some comfort to bulls,
but the near-term outlook is much less certain positive than it
was a couple of weeks ago."
Analysts said bearish market sentiment was also evident from
large withdrawals from exchange-traded funds. Gold held in New
York-listed StreetTRACKS Gold Shares <GLD.P>, the world's
largest gold-backed ETF, fell about 50 tonnes to 591 tonnes in
the last two sessions.
The dollar pared early gains but headed for its best monthly
performance in 2-1/2 years against a basket of major currencies
and rose further from this week's record lows versus the euro,
boosted by improved sentiment on the U.S. economy.
The number of workers filing initial claims for unemployment
benefits unexpectedly fell last week, in a sign the U.S. economy
may not be in as much trouble as previously thought.
A firmer dollar makes gold costlier for holders of other
currencies and often lowers bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
Oil climbed towards $118 a barrel as strikes by workers
caused major supply disruptions in Nigeria and the North Sea.
David Holmes, director of sales at Dresdner Kleinwort, said
near-term sentiment in the bullion market was not very positive
as concerns about the credit crisis had receded and some of the
funds, which follow short-term trends, may sell gold.
GOLD VULNERABLE
Dresdner Kleinwort said in a report that when a market
stopped rising despite positive fundamentals, investors should
get out of their trading positions.
"Gold is likely to have already reached the year's high and
to come under pressure particularly in H2. We thus recommend not
only closing long positions in gold, but also selling gold
short," it said.
In industry news, the Swiss National Bank does not plan gold
sales beyond the programme to sell 250 tonnes announced last
year, Chairman Jean-Pierre Roth said.
In other precious metals, platinum partly recovered after
falling to a three-week low of $1,907 an ounce. It <XPT=> was
last quoted at $1,935/1,950, still down from $1,961.50/1,971.50
late on Thursday. It hit a record high of $2,290 on March 4.
But precious metals consultancy GFMS Ltd said on Thursday
that platinum may spike to a record high of $2,400 an ounce this
year as the investment climate continued to be positive and
fundamentals remained strong. []
Silver <XAG=> was at $16.73/16.78, down from $16.68/16.78 an
ounce, while spot palladium <XPD=> fell to $431/439 an ounce
from $435/441 in the U.S. market late on Thursday.
(Reporting by Atul Prakash; editing by Chris Johnson)
