(Recasts, updates with closing prices, market activity, adds
NEW YORK to dateline)
By Frank Tang and Atul Prakash
NEW YORK/LONDON, April 9 (Reuters) - Gold ended 2 percent
higher 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 $932.60 an
ounce, after falling to a low of $902.80. It was at
$932.50/933.30 by New York's last quote at 2:15 p.m. EDT (1815
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."
One New York floor trader said gold's strength was largely
tracking movement of crude oil. U.S. crude futures <CLc1>
settled up $2.37, or 2.2 percent, at an all-time high of
$110.87 a barrel.
The dollar fell against a basket of currencies as traders
snapped up the euro in anticipation of more tough inflation
talk and signals from the European Central Bank it is not ready
to cut rates.
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.
George Gero, vice president of RBC Capital Markets Global
Futures in New York, cited supply worries after Peru's biggest
federation of mineworkers unions called a nationwide strike for
May. []
U.S. gold futures for June delivery <GCM8> on the COMEX
division of the New York Mercantile Exchange settled up $19.50,
or 2.1 percent, at $937.50 an ounce, reversing initial losses.
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 past few
months would remain in place and investors would continue to
look to 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
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.
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 proceeds to invest in
government and corporate bonds, and possibly equities.
Spot platinum <XPT=> fell to $2,018/2,025 an ounce from
$2,008/2,018 late in New York on Tuesday. Silver <XAG=> was at
$18.11/18.16 an ounce, up from $17.64/17.69, while palladium
<XPD=> was at $456/460, up from $449/457 an ounce.
(Additional reporting by Pratima Desai in London; Editing by
Walter Bagley)
