(Recasts, adds quotes, changes prices, pvs SINGAPORE)
By Atul Prakash
LONDON, April 28 (Reuters) - Gold rose on Monday as oil
roared to a record high near $120 a barrel, but investors were
cautious ahead of this week's meeting of the U.S. Federal
Reserve on interest rates.
Bullion <XAU=> rose as high as $894.25 an ounce and was
quoted at $892.40/893.10 at 1014 GMT, against $886.90/888.30 in
New York late on Friday.
"I do expect gold to drift around $900 for a little while,
until we really see another strong shift in sentiment. Even the
spike in oil is failing to really fire up the gold market," said
Daniel Hynes, metals strategist at Merrill Lynch.
"After such a good run, a lot of people took the opportunity
to liquidate, but the general trend would be for rising prices
in the medium- to long-term," he said.
Gold got support from strong oil and a weaker dollar, but
analysts said bullion's upward movement was not as impressive as
it was last month when historic high oil and a record low dollar
propelled gold to a lifetime high of $1,030.80 on March 17.
The metal has fallen 13 percent since then and has been
struggling to regain $900. It hit a three-week low of $877.60 on
Friday before rising after oil surged, lifting gold's appeal as
a hedge against inflation.
"Investors are awaiting the outcome of the U.S. Fed's
decision concerning possible interest rate cuts," Fairfax
investment bank said in a report.
Oil prices leapt to a record high near $120 a barrel after
workers pushed ahead with a two-day strike that shut a major
North Sea oil pipeline supplying about half of Britain's oil.
Fresh violence in Nigeria and simmering tensions between the
United States and major oil exporter Iran also helped.
DOLLAR SUPPORTS
In the currency market, the dollar slipped after approaching
a three-week high against the euro. The market awaited the
Federal Reserve's decision on interest rates on Wednesday.
The Fed has slashed borrowing costs in response to the
credit crisis that erupted last year, but some speculate that
climbing fuel and food prices could prevent any more big cuts.
A rate cut tends to weaken the dollar and lift gold demand,
as the metal is seen as a an alternative investment and often
moves in the opposite direction of the U.S. currency.
"Sluggish mine supply, weak equity/property markets and
a low U.S. dollar should see gold trade in a $800-$1,050
range over the next six months, before it weakens significantly
in 2009," said David Thurtell, metals analyst at BNP Paribas.
Gold futures for June delivery <GCM8> on the COMEX division
of the New York Mercantile Exchange rose $5.30 an ounce to
$895.00 an ounce in electronic trading.
In industry news, Russia's Highland Gold Mining Ltd <HGM.L>
said it recorded a profit of $18.1 million in 2007, reversing a
$94.9 million loss in 2006. It produced 156,474 ounces of gold
in 2007 and sold 150,427 ounces at an average price of $708 per
ounce. []
In other metals, platinum <XPT=> rose to $1,965/1,980 an
ounce from $1,944/1,964 late on Friday, silver <XAG=> gained to
$16.95/17.00 an ounce from $16.83/16.89 and spot palladium
<XPD=> was up $1.50 at $437/445 an ounce.
(Reporting by Atul Prakash; editing by Chris Johnson)
