(Updates with quotes, prices)
By Atul Prakash
LONDON, March 31 (Reuters) - Gold drifted higher on Monday
as a weaker dollar against the euro and a recovery in oil prices
prompted investors to buy, but the metal was expected to trade
in a range in the near term.
Spot metal <XAU=> climbed to a high of $940.80 an ounce and
was quoted at $935.10/936.00 at 1447 GMT, against $931.80/932.60
late in New York on Friday, when it dropped more than 2 percent
on falling crude oil prices.
"We are seeing a range trading here. The market is too shy
to test $950. Each time we move higher, we see some profit
taking," said Frederic Panizzutti, analyst at MKS Finance.
"We need some new factors in the market to see a break of
$950. There is some willingness to move higher, but the market
lacks a catalyst to motivate larger players to get back into the
market," he said.
Gold was supported by the euro, which again targeted record
highs against the dollar after higher-than-forecast euro-zone
price data reinforced expectations that the inflation-focused
European Central Bank would not start cutting rates soon.
The outlook for euro-zone rates contrasts with the United
States where the Federal Reserve is widely expected to continue
to cut the rate to try to stoke economic growth. Higher rates
tend to lure investors and lift demand for a currency.
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 turned higher, after losing ground earlier in the
session partly in response to a lull in fighting in Iraq's
southern city of Basra that eased fears of potential supply
disruptions from the region.
"The signs for the week ahead are encouraging, as the U.S.
data due out should boost hopes of rate cuts and undermine the
dollar, both of which will favour precious metals," Commerzbank
said in a market note.
U.S. DATA AWAITED
The market is awaiting a jobs report on Friday for
direction. U.S. employers are expected to have cut payrolls for
a third straight month during March. The data may offer more
clues on the state of the economy and the interest rate outlook.
Gold has lost more than 9 percent since spiking to an
all-time high of $1,030.80 an ounce on March 17. Record high oil
and expectations of further interest rate cuts in the United
States had propelled bullion to the record high levels.
"Concerns about a slowing U.S. economy and the financial
stability of major institutions continue to affect broader
investor sentiment, with the precious metals benefiting from the
uncertainty," said Tom Kendall, metals strategist at Mitsubishi.
"In this environment, gold should test the $950 level again
sooner rather than later."
Analysts said gold's fundamentals were intact amid supply
constraints -- heightened recently by a power crisis that has
disrupted mining in South Africa, the world's main platinum
producer and the second-largest gold producer.
"Fundamentally, lower production out of South Africa and
expected stronger demand out of India and China should see gold
prices recover in the autumn, if not earlier," Fairfax
investment bank said in a daily report.
U.S. gold futures for June delivery <GCM8> rose $3.1 an
ounce to $939.60, having fallen 1.83 percent on Friday.
In other metals, platinum <XPT=> rose to $2,020/2,030 an
ounce from $2,000/2,010 on Friday, while silver <XAG=> firmed to
$17.91/17.96 an ounce from $17.88/17.93. Spot palladium <XPD=>
rose $1 to $442/450 in New York.
(Reporting by Atul Prakash; editing by Elizabeth Piper)
