(Updates with quotes, prices)
By Atul Prakash
LONDON, March 26 (Reuters) - Gold hit a one-week high above
$950 an ounce on Wednesday as a falling dollar and strong oil
prices encouraged investors to shift money back into the market
after last week's heavy sell-off.
Gold <XAU=> rose to a high of $950.20 an ounce and was
quoted at $947.30/948.20 at 1459 GMT, against $934.60/935.40
late in New York on Tuesday.
"We saw some pretty big falls last week and there has
certainly been an increase in buying over the last day or so
from investors who think those falls were overdone," said Daniel
Hynes, metals strategist at Merrill Lynch.
"I think we are going to start seeing a little bit of a
consolidation period, with gold trading around $1,000 in the
next couple of weeks. I certainly expect to see the long-term
upward trend continue after that."
Gold hit a record of $1,030.80 on March 17 before a broad
sell-off in commodities dragged down prices to a one-month low
of $904.65, briefly hurting investor confidence in the metal,
seen as an alternative investment and a hedge against inflation.
The dollar slumped for a second straight session after an
unexpected fall in U.S. durable goods orders bolstered worries
about the health of the economy, which could prompt further
interest rate cuts.
Higher-than-expected U.S. new home sales numbers also failed
to stop a slide in the dollar.
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 jumped above $104 a barrel as a strike disrupted
operations at a French oil refining hub and the weakening dollar
encouraged investors back into the market.
TREND INTACT
Analysts said gold could retest the highs in the near term.
"We are still going to have another leg up towards $1,000,
but I think it might be slower than the run up we saw the last
time," said Suki Cooper, metals analyst at Barclays Capital.
"There has been some profit taking, but I don't think the
overall trend has been damaged," she said, adding dollar
weakness, inflationary concerns, expectations of further Fed
rate cuts and financial market worries were expected to continue
supporting the market.
In other markets, U.S. gold futures for April delivery
<GCJ8> rose $11.8 an ounce to $946.80, but were off last week's
record high of $1,033.90.
"In the coming weeks and months, negative dollar sentiment
will remain a key driving force behind gold's bull trend, as
further rate cuts by the Fed will drive investors to stronger
yielding assets," said James Moore, precious metals analyst at
TheBullionDesk.com.
A rate cut tends to weaken the dollar and often helps gold
as investors look for alternative assets for better returns.
Platinum was supported by supply fears due to the power
crisis in top producer South Africa. Palladium and silver also
firmed but remained below their recent highs.
Spot platinum <XPT=> was at $1,980/1,990 an ounce, compared
with $1,960/1,970 in New York on Tuesday and a record high of
$2,290 hit on March 4.
South Africa's Public Enterprises Minister Alec Erwin said
on Tuesday that power utility Eskom's ability to raise capital
could be undermined if it was not allowed to raise tariffs.
[]
Eskom has struggled to cope with rising demand due to years
of underspending on generating capacity. The energy grid came
close to collapse in January, forcing gold and platinum mines to
shut down for five days and driving platinum to record peaks.
Silver <XAG=> rose to $18.04/18.09 from $17.78/17.83 an
ounce, while palladium <XPD=> was up at $450/455 an ounce,
versus $442/447 in the U.S. market late on Tuesday.
(Additional reporting by Bete Felix in London)
(Editing by Chris Johnson, David Evans)
