(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Atul Prakash
NEW YORK/LONDON, May 28 (Reuters) - Gold bounced off an
earlier two-week bottom but still ended lower on Wednesday as
oil reversed its losses, highlighting the metal's appeal as a
hedge against inflation, dealers said.
Gold <XAU=> was at $899.65/901.05 an ounce by New York's
last quote at 2:15 p.m. EDT (1815 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
of 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 $2 to end above $131 a barrel.
Gold tends to move in line with oil prices as it boosts
bullion's appeal as a hedge against 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 government 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.
"Certainly, today's low is going to be an important hold to
follow, because if that holds, I think we are going to see
another push up back to the $930 level, said Adam Hewison,
president of MarketClub.com in Annapolis, Maryland.
Hewison said that gold could recover further but it was too
early to conclude that it was a definite buy signal.
PLATINUM WEAKER
In other bullion markets, U.S. gold futures for June
delivery <GCM8> settled down $7.40 at $900.50 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 of $2,035 an ounce and was last at $2,059/2,079
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 $17.36/17.43, versus $17.41/17.47 late on Tuesday.
Palladium <XPD=> was at $432.50/$440.50 an ounce, down from
$436.50/444.50.
(Additional reporting by Humeyra Pamuk and Karl Plume in
London and Maryelle Demongeot in Singapore; editing by Jim
Marshall)
