(recasts, adds quotes, changes prices, pvs SINGAPORE)
By Atul Prakash
LONDON, May 6 (Reuters) - Gold extended gains on Tuesday on
bargain hunting and record-high oil prices, which enhanced the
metal's appeal as a hedge against inflation.
Bullion's fall to a four-month low of $845 an ounce on
Friday also spurred buying from the physical sector, especially
in top consumer India ahead of a religious festival.
But gold was still well below a record high of $1,030.80 hit
on March 17. It <XAU=> was at $878.30/879.30 an ounce at 1011
GMT, against $871.15/872.55 in New York late on Monday.
"We saw a fairly big retracement last week and there was a
feeling that probably it was overdone. There has been some
buying as support is coming back in," said Daniel Hynes, metals
strategist at Merrill Lynch.
"But it doesn't look strong enough to really kick-start a
sustained upward trend. The effect of oil is less than we have
seen in the past. It may continue to trade in a fairly tight
range and struggle to push above $900 in the short term."
The bullion market got some support from the dollar, which
fell against the euro as investors were cautious about picking
up the U.S. currency in the wake of record high oil prices.
Strong oil prices, which rose to trade near $121 per barrel
due to supply concerns in Iran and Nigeria, were seen weighing
on the U.S. economy.
A weaker dollar makes gold cheaper for holders of other
currencies and often lifts bullion demand.
Some analysts said the metal was expected to gain further.
"Seasonally strong physical demand should continue to
provide a good base for gold in the coming sessions," said James
Moore, metals analyst at TheBullionDesk.com.
"And with oil prices setting fresh records investors may
look to increase their gold holdings as a hedge against
inflation," he said in a daily market report.
India, the world's largest gold consumer, celebrates on
Wednesday and Thursday Akshaya Tritiya, a festival when many
Hindus buy precious metals in the belief it will give them
lasting prosperity.
Dealers also reported buying interest from jewellers and
bargain hunters in the Middle East, Indonesia and Thailand.
Despite a pick-up in physical buying, sentiment remained
weak due to heavy withdrawals of the metal from exchange-traded
funds (ETFs) in the past days.
Gold held in StreetTRACKS Gold Shares, the world's largest
gold-backed ETF <XAUEXT-NYS-TT>, was unchanged at 580.45 tonnes,
but down from a record high of 663.83 tonnes in mid-March.
In other bullion markets, U.S. gold futures for June
delivery <GCM8> rose $5.1 an ounce to $879.20 an ounce.
Tokyo precious metal markets were closed for a holiday.
Spot platinum <XPT=> rose to $1,922/1,942 an ounce from
$1,914.50/1,934.40 late on Monday, but was still well below a
record high of $2,290 an ounce on March 4.
Silver <XAG=> rose to $16.73/16.79 from $16.64/16.70 an
ounce. The metal struck a 27-year high of $21.24 on March 17.
Palladium <XPD=> was up at $423/431 from $416.50/424.50 an
ounce, but remained below a 6-1/2-year high of $590 on March 4.
(Additional reporting by Lewa Pardomuan in Singapore)
(Reporting by Atul Prakash; editing by Editing by Peter
Blackburn)
