(Updates with quotes, closing prices, market activity, adds
NEW YORK to dateline)
By Frank Tang and Atul Prakash
NEW YORK/LONDON, March 26 (Reuters) - Gold ended higher and
near 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.
However, gold could further consolidate before testing new
highs after a tumultuous price drop last week had put a damper
on the yellow metal's run, market watchers said.
Gold <XAU=> rose as high as $951.60 an ounce and was at
$949.00/949.80 by New York's last quote at 2:15 p.m. EDT (1815
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.
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 economy's health, 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.
Soaring energy prices boosted gold's appeal as a hedge
against inflation. U.S. crude futures <CLc1> ended up $4.68 at
$105.90 a barrel.
"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.
In other markets, the active U.S. gold contract <GCJ8> for
April delivery on the COMEX division of the New York Mercantile
Exchange settled up $14.20, or 1.5 percent, at $949.20 an
ounce.
OUTLOOK CAUTIOUS
However, dealers said that gold could run into strong
resistance due to chart-based weakness and lost momentum among
gold bulls.
"This rally that we are seeing (now) is just a corrective
rally. I think it's going to have problems between $965 to
$980, and you will see professional selling coming to the
market at that point of time," said Adam Hewison, president of
MarketClub.com, Annapolis, Maryland.
James Steel, metals analyst with HSBC in New York, told
clients in a note that commodities prices, including gold and
other precious metals, had ample opportunity to extend declines
further during the recent correction because investors had
reduced or eliminated their exposure to commodities.
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=> rose 1.5 percent to $1,990/2,000 an
ounce from $1,960/1,970 late in New York on Tuesday. It hit a
record high of $2,290 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 $18.38/18.43 from its Tuesday U.S.
close of $17.78/17.83 an ounce, while palladium <XPD=> was up
at $453/458 an ounce, versus $442/447 in the U.S. market late
on Tuesday.
(Editing by Christian Wiessner)
(Additional reporting by Bate Felix in London)
