(Recasts, adds quotes, changes prices)
By Atul Prakash and Tamora Vidaillet
LONDON, April 22 (Reuters) - Gold rose more than 1 percent
on Tuesday as the dollar hit a record low against the euro and
historic high oil boosted the metal's appeal as an alternative
investment.
But investors remain cautious and the market's failure to
hold above $950 after hitting a record high of $1,030.80 an
ounce on March 17 has increased bearish sentiment.
"I see the market trading initially in a range of $910 and
$935, but there is a mounting possibility that gold could break
lower to test $900 later this week," said Wolfgang
Wrzesniok-Rossbach, head of marketing at precious metals group
Heraeus.
Spot gold rose as high as $923.60 an ounce and was quoted at
$921.00/921.70 at 1451 GMT, compared with $913.80/914.60 late in
New York on Monday.
He said physical demand was still weaker both from retail
investors and jewellery makers.
Some analysts saw the potential for prices to rise in the
near term, depending on the direction of oil and the dollar.
The dollar extended losses to hit a record low against the
dollar, while oil struck a lifetime peak above $118 a barrel on
a jump in demand from China, the world's second-biggest energy
consumer, and worries about supply from Russia and Nigeria.
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.
The dollar could come under further pressure in the coming
sessions, as the Federal Reserve is expected to lower interest
rates further from the current 2.25 percent at a policy meeting
on April 29-30.
A cut in U.S. rates tends to weaken the dollar and often
helps the precious metals market.
GOLD-OIL CORRELATION
Despite gold's reaction to strong oil prices, analysts said
the metal's correlation with oil had weakened.
"Gold seems to have partly de-linked from crude oil in the
sense that the gains in crude oil aren't fully reflected in the
metal," said Pradeep Unni, metals analyst at Vision Commodities.
"Gold is reacting slowly and seems to be consolidating above
key support levels before proceeding ahead," he added.
Prices jumped to a three-week high of $952.60 on April 17
before profit taking kicked in and dragged down prices to as low
as $904.35 the following day. It has lost more than 10 percent
in value since hitting a lifetime high above $1,000.
Gold had gained on speculative buying spurred by record high
oil prices and expectations of further interest rate cuts in the
United States, which has reduced the dollar's appeal.
In other metals, platinum shed 0.40 percent at $1,997/2,007
an ounce, against $2,005/2,015 late on Monday and a record high
of $2,290 on March 4, as profit taking took hold in the wake of
a spike to a one-month high last week.
Silver rose 1.7 percent to $17.69/17.74 from $17.39/17.44 an
ounce, while palladium was up $1 at $451/457.
