(Updates with quotes, prices)
By Atul Prakash
LONDON, April 9 (Reuters) - Gold firmed more than 1 percent
on Wednesday as the dollar slipped on growing expectations of
further aggressive rate cuts by the U.S. Federal Reserve and oil
prices jumped, analysts said.
Spot gold <XAU=> rose to a session high of $925.40 an ounce
after falling to a low of $902.80. It was at $924.00/924.90 at
1448 GMT, against $913.10/913.90 in New York late on Tuesday.
"The metal continues to look to oil and dollar movements for
short term direction," said Suki Cooper, precious metals analyst
at Barclays Capital.
"The overall environment remains positive for gold, given a
raft of supportive external factors ranging from dollar
weakness, anticipation of further Fed rate cuts as well
inflationary concerns."
The dollar fell against the euro and the yen on views the
Fed could cut rates by a substantial 50 basis points this month
amid worries of a possibly severe U.S. economic downturn.
A weaker dollar makes dollar-denominated metals cheaper for
holders of other currencies, but a slight recovery in recent
days has made gold bulls wary of adding to their holdings. The
metal is also traditionally seen as a hedge against inflation.
Oil jumped to more than $111 a barrel, within sight of a
record high, after a U.S. government report showed a surprise
drop in inventories in the world's top fuel consumer.
Precious metals consultancy GFMS Ltd. said gold prices were
likely to bounce back above $1,100 an ounce this year after
bottoming out in the high $800s. []
It said in a widely-tracked market report, Gold Survey 2008,
that the factors supporting prices over the last few months
would remain in place and investors would continue to look at
bullion for strong returns.
Traders said volumes were low as the market looked ahead to
central bank and Group of Seven meetings this week, which could
offer clues to the future direction of currencies and bullion.
"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.
CENTRAL BANKS
The market also looked at central banks for near-term
direction. The European Central Bank is 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 is seen as negative for gold.
Some analysts said the market was expected to consolidate
its position before marching higher again.
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.
RBC Capital Markets said in a market report that investors
should take profits ahead of the end of a Fed rate cutting
cycle.
"Gold is poised for a consolidation at lower levels before
making another run at $1,000/oz later in 2008."
Plans by the International Monetary Fund to sell some gold
from its reserves capped near term gains, 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.
Spot platinum <XPT=> fell to $1,995/2,005 an ounce from
$2,008/2,018 late in New York. Silver <XAG=> was at $17.16/18.21
an ounce, up from $17.64/17.69, while palladium <XPD=> rose $1
to $450/458 an ounce.
(Additional reporting by Pratima Desai in London)
(Editing by Nigel Hunt)
