(Recasts, adds quotes, changes prices, pvs SINGAPORE)
By Atul Prakash
LONDON, March 13 (Reuters) - Gold extended gains on Thursday
to trade just below record highs, as investor buying speeded up
after the dollar sank and oil hovered near lifetime peaks.
Gold <XAU=> rose as high as $991.20 an ounce before easing
to $988.60/989.40 at 1048 GMT, against $981.90/982.70 late in
New York on Wednesday and a record high of $991.90 on March 6.
"Right now the dollar is the main driving factor behind the
move, but the gold price has risen surprisingly little given the
dollar weakness," said Walter De Wet, analyst at Standard Bank.
Increased supply of scrap gold and a sharp drop in physical
demand because of high prices were putting a cap on the price
rally, he said.
"If the dollar stays at this level, we might see $1,000 very
soon, but if it retraces, it's going to become difficult."
The dollar hit fresh depths, hammered to a 12-year low
versus the yen and record troughs against the euro on mounting
worry about the health of the U.S. economy and financial sector.
The dollar's slide came despite remarks from U.S. President
George W. Bush on Wednesday that he would like to see a stronger
dollar and expressed concern its falling value was one cause of
soaring U.S. energy prices. []
Market expectations for aggressive Fed rate cuts next week
have also continued to hamper 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.
Oil prices held steady near $110 a barrel, trading just
below a record high as a weak dollar overshadowed an increase in
U.S. crude inventories.
"The gold market is now firmly in the hands of investors,
with their sentiment (and the price) being driven by global
macro-economic trends," Fortis Bank said in a market report.
"Every bit of bad U.S. economic data boosts gold in two
ways. First because it reinforces the return of its role as a
safe-haven asset, and second because the dollar falls on
expectations of further Federal Reserve rate cuts."
SHARP PRICE GAINS
Gold has jumped 19 percent this year on top of a 32 percent
rise in 2007, mainly on inflation worries following firm oil
prices and chances of more rate cuts in the United States, which
elevates gold's appeal as an alternative investment.
"Given the return of credit market liquidity worries and
supportive movements in both oil and the dollar, it looks as if
the corrective phase in gold has come to a close," said James
Moore, analyst at TheBullionDesk.com.
Jewellers were on the sidelines, but dealers in Japan saw
purchases from the electronics sector. Gold-plated connectors
are an integral part of plugs and sockets, and the metal is also
used in wiring to connect parts of semiconductors.
In industry news, No. 2 gold producer Newmont Mining Corp
said global gold mine output will decline over the next decade
or so because of production constraints and past underinvestment
in finding new resources.
Official data showed that South African gold output fell
16.5 percent in volume terms in January compared with the same
month the previous year.
Platinum <XPT=> rose to $2,090/2,100 from $2,060/2,070 an
ounce in New York, while silver <XAG=> was at $20.35/20.40 an
ounce, against $20.04/20.09. Spot palladium <XPD=> rose to
$510/515 an ounce from $496/501 in New York.
(Reporting by Atul Prakash; editing by Peter Blackburn)
