UPDATE 3-Gold holds above $900 on oil but caution prevails

                                
 (Recasts with prices, quotes, changes dateline, pvs SYDNEY)
                                
 By Lewa Pardomuan
                                
 LONDON, May 20 (Reuters) - Gold inched up and held above
$900 on Tuesday, on inflation fears driven by record-high oil
prices, but investors were cautious after a drop in global
quarterly demand for the precious metal.
                                
 Demand for gold for jewellery, investment and other uses,
fell 16 percent compared with a year ago to 701 tonnes in the
first quarter of 2008 -- the lowest quarterly figure in five
years -- as bullion hit a record above $1,000 an ounce, the
World Gold Council said in a report. [ID:nL19678201]
                                
 Spot gold <XAU=> edged up to $906.65/907.65 an ounce from
$905.00/906.40 late in New York on Monday, when it hit an
intraday high of $913.35 an ounce, its loftiest level since
April 23.
                                
 "I suspect if it fails to break through that sort of
$914-$915 barrier, we may well be looking at it below $900 again
very shortly," said Darren Heathcote of Investec Australia in
Sydney.
                                
 "I think some funds have decided that it's better to take
some profit off the table and there's a wait-and-see attitude."
                                
 Global jewellery demand fell 21 percent year-on-year to
445.4 tonnes, the lowest quarterly level since the early 1990s,
while net retail investment demand dropped 35 percent to 72.7
tonnes, according to the WGC.
                                
 Gold has lost more than 12 percent in value since spiking to
a record high of $1,030.80 an ounce on March 17, on profit
taking and a recovery in the U.S. dollar against other
currencies.
                                
 But expensive crude oil, which raises fears of inflation, is
likely to offer support. 
                                
 Oil <CLc1> extended its rally on Tuesday past $127 a barrel
on renewed fears of supply disruption and OPEC's reluctance to
raise output at its next meeting in September. [ID:nSP395669]
                                
 Gold futures for June delivery <GCM8> on the COMEX division
of the New York Mercantile Exchange added $1.5 to $907.3 an
ounce in electronic trading.
                                
 In other precious metals, spot platinum <XPT=> rose to
$2,149.00/2,164.00 an ounce from $2,139.50/2,159.50 in New York
on Monday, when it hit its highest in more than two months at
$2,174 ahead of an outlook report by refiner Johnson Matthey
<JMAT.L>.
                                
 Profit taking erased some of the gains but sentiment
remained bullish, with Johnson Matthey expecting the platinum
market to close 2008 in a significant deficit due to output
shortfalls. [ID:nL15825991].
                                
 "With ongoing power shortages likely, we would not be
surprised to see platinum prices continue to rally over the
months ahead during the South African winter," investment bank
Fairfax said in a report.
                                
 Platinum struck a record high of $2,290 an ounce on March 4
after a power crisis in main producer South Africa disrupted
mining and sparked fear of a supply deficit.
                                
 Spot silver <XAG=> rose to $17.07.17.12 an ounce from
$16.99/17.05 late in New York. Palladium <XPD=> dropped to
$441/446 an ounce from $444/452 an ounce.
 (Editing by Ben Tan)