(Adds quotes, New York closing prices, market activity)
By Atul Prakash and Tamora Vidaillet
LONDON, April 22 (Reuters) - Gold ended more than 1 percent
higher on Tuesday as the dollar hit a historic low against the
euro and record high oil prices 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 <XAU=> rose as high as $925.30 an ounce and was
at $920.65/922.05 by New York's last quote at 2:15 a.m. EDT
(1815 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.
U.S. gold futures for June delivery <GCM8> settled up $7.60
at $925.20 an ounce.
Some analysts saw the potential for prices to rise in the
near term, depending on the direction of oil and the dollar.
The euro <EUR=> rallied against the dollar, trading above
$1.60 for the first time since its 1999 inception, while U.S.
crude futures <CLc1> struck a lifetime peak of $119.90 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 U.S. 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.
Jon Nadler, senior analyst of Kitco Bullion Dealers in
Montreal, told clients in a note that "a worrisome decoupling
appeared to be taking shape in gold vis-a-vis the dollar and
oil."
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 <XPT=> rose to $2,017.50/2,027.50
an ounce, against $2,005/2,015 late on Monday and a record high
of $2,290 on March 4.
Silver <XAG=> climbed to $17.64/17.72 from its previous
finish of $17.39/17.44 an ounce, while palladium <XPD=> was up
$2 at $452/458.
(Additional reporting by Frank Tang in New York; Editing by
Marguerita Choy)
