By Atul Prakash and Anna Ringstrom
LONDON, March 12 (Reuters) - Gold prices rose more than 1
percent on Wednesday as a record low dollar and soaring oil
prices triggered bullion buying, analysts said.
Gold <XAU=> was at $979.75/980.45 an ounce by 1647 GMT after
rising as high as $981.90. Gold closed at $971.00/971.80 in New
York late on Tuesday, when it fell on a dollar rally after
central banks announced plans to boost liquidity.
"The dollar weakness has helped gold prices," said David
Thurtell, analyst at BNP Paribas, adding prices would probably
be well supported around $970-$975 until the release of U.S.
retail sales and CPI data on Thursday.
"With the market turmoil and the dollar weakness, chances
are good that prices can reach $1,000," he said.
The euro rose to an historic high against the dollar as
strong euro zone economic data renewed focus on the divergent
paths of European and U.S. interest rates.
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 rose to a record high as dollar weakness countered a
larger-than-expected rise in U.S. fuel inventories.
Daniel Hynes, metals strategist at Merrill Lynch said the
outlook for gold was still very positive.
"We are expecting the U.S. dollar to come under increasing
downward pressure and believe the $1,000-an-ounce mark will be
reached pretty soon," Hynes said.
Gold is up about 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.
"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."
SUPPORTING FACTORS
Gold hit a record high of $991.90 on March 6, and dealers
said record high oil and expectations of further interest rate
cuts in the United States were likely to support the market.
"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 $2,060/2,070, 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 $20.09/20.14 from $19.61/19.66 an
ounce in New York, while palladium <XPD=> was up at $496/501 an
ounce, versus $486/491 in the U.S. market.
(Editing by Chris Johnson)
