(recasts, adds quotes, changes prices, pvs SINGAPORE)
By Atul Prakash
LONDON, April 9 (Reuters) - Gold drifted lower on Wednesday
as the metal's failure to break key technical levels on the
upside prompted investors to take profits from recent gains.
But a weaker dollar and firmer oil prices were expected to
limit declines, they said, adding the market was looking forward
to central bank and the Group of Seven (G7) meetings this week
that may offer direction to currencies and bullion.
Spot gold <XAU=> made several attempts in the past days to
break $930 an ounce, but slipped.
The metal rose as high as $918.20 an ounce on Wednesday
before falling to a low of $902.80. It was at $906.55/907.25 at
1029 GMT, against $913.10/913.90 in New York late on Tuesday,
"The Group of Seven meeting on Friday has a lot to do with
the dollar. The big risk is that if they come out with some
major rescue plan for the banking system, gold will fall quite
sharply, said Matthew Turner, analyst at Virtual Metals.
The dollar slipped as investors digested comments from
Federal Reserve policymakers pointing to continued weakness in
the U.S. economy, even as inflation risks continued.
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 prices rebounded, edging closer to $109, as concerns
over a decline in gasoline stocks ahead of the U.S. driving
season helped keep the market on the boil.
"There is nothing technically or fundamentally at this point
to suggest the U.S. currency has bottomed," said Pradeep Unni,
precious metals analyst at Vision Commodities.
"This should naturally mean gold should gain from the weak
dollar, but may need more than a weak dollar factor for
sustained gains," he added.
CENTRAL BANKS
The market also looked at central banks for near-term
direction. The Bank of Japan kept its interest rate target
unchanged at 0.5 percent on Wednesday, as expected.
The European Central Bank is also expected to keep interest
rates on hold, but the Bank of England could cut its key rate on
Thursday.
A rate cut by European central banks tends to help the
dollar and seen as a negative factor for the gold market.
"We reiterate that metals prices remain sensitive to oil
price movements. Near-term dollar weakness should lift crude oil
prices, which should lead to a rise in precious metal prices,"
analysts at Standard Bank said in a market report.
Plans by the International Monetary Fund to sell some gold
from its reserves also lowered sentiment, but analysts said the
market would absorb the sales, which are expected to take place
in a controlled manner.
The IMF is the world's third-largest gold holder after the
United States and Germany, with 3,217.3 tonnes in reserves. It
plans to sell 403.3 tonnes and use the profits to invest in
government and corporate bonds, and possibly equities.
Gold hit a record high of $1,030.80 an ounce on March 17
before falling to a two-month low of $872.90 last week in a
broad commodities sell-off.
In other markets, U.S. gold futures for June delivery <GCM8>
fell $6.7 an ounce to $911.30 an ounce.
Spot platinum <XPT=> declined more than 1 percent to
$1,980/1,990 an ounce from $2,008/2,018 late in New York, while
silver <XAG=> fell to $17.58/17.63 an ounce from $17.64/17.69.
Palladium <XPD=> was down $1 at $448/456 an ounce.
(Reporting by Atul Prakash; editing by Nigel Hunt)
