(Updates comments and prices)
By Atul Prakash
LONDON, March 27 (Reuters) - Gold eased after rising to a
one-week high on Thursday as the dollar gained, but analysts
said sentiment was positive and the metal may retest the
$1,000-mark in the near term.
The metal, traditionally seen as a hedge against oil-led
inflation, was also expected to get support from strong oil
prices that jumped after an oil pipeline explosion in Iraq.
Spot gold <XAU=> hit a high of $954.50 an ounce before
falling to $945.90/946.90 at 1533 GMT, down from $949.00/949.80
in New York on Wednesday. It hit a lifetime high of $1,030.80 an
ounce on March 17.
"On the one hand you have high oil prices supporting gold
and on the other hand you have got quite a lot of news about the
dollar gaining some ground against the euro and other mixed
economic data that has taken some shine off gold," metals
analyst Robin Bhar at UBS said.
Oil surged above $106 a barrel after saboteurs blew up one
of Iraq's two main export pipelines, a Southern Oil Company
official told Reuters, adding the country was likely to lose
about a third of crude exported through Basra.
The attack on the pipeline in southern Iraq came on the
third day of an Iraqi military operation against fighters loyal
to Shi'ite cleric Moqtada al-Sadr in the oil port of Basra.
A rise in the dollar put pressure on the metal, which gained
more than 20 percent in 2008 on speculative buying driven by
record high oil prices and expectations of further rate cuts in
the United States, which reduced the dollar's appeal.
The dollar edged up against the euro but was still on track
for the worst quarterly performance since late 2004 as investors
compared relative economic resilience in the euro zone with a
sharp U.S. slowdown.
Demand for the U.S. currency ahead of the end of the first
quarter gave the dollar some short term support after two days
of steep losses on contrasting U.S. and euro zone data.
A weaker dollar makes gold cheaper for holders of other
currencies and often lifts bullion demand.
"But the market is consolidating, waiting for new direction
to come through, and gold would always thrive as a safe heaven
and that has not gone away as a factor and it will propel gold
again higher in due course," Bhar said.
OUTLOOK POSITIVE
Analysts said investors' confidence was gradually being
restored after last week's broad sell-off in commodities that
knocked down gold to a one-month low of around $904 an ounce.
"We are pretty bullish on gold over the medium-term. Most
likely, we are going to see some short-term stability," said Dan
Smith, metals analyst at Standard Chartered Bank.
"Some people were a bit shocked by the drop we saw last
week, so the market does need to recover. Obviously if we see
any major breakout of the dollar, it's going to push gold up."
Premiums for gold bars rose to their highest in nine months
in Singapore this week, driven by bargain hunting. Demand from
jewellers also stirred trade in Hong Kong, while purchases from
investors in Asia resurfaced after last week's sell-off.
In other markets, gold futures for April delivery <GCJ8> on
the COMEX division of the New York Mercantile Exchange eased
$2.70 an ounce to $946.50.
Spot platinum <XPT=> hit a high of $2,023 an ounce against
$1,990/2,000 in New York.
Palladium <XPD=> prices fell to $445/460 an ounce from
$453/458, having hit a high of $454 on Thursday. Silver <XAG=>
was at $18.26/18.31 an ounce after rising to a one-week high of
$18.46 an ounce, versus $18.35/18.40 in the U.S. market.
(Additional reporting by Bate Felix in London)
(Editing by Elizabeth Piper)
