(Updates with quotes, prices)
By Anna Ringstrom
LONDON, March 18 (Reuters) - Gold rose 1 percent on Tuesday
on a weaker dollar before paring gains, with investors waiting
for a U.S. interest-rate cut by the Federal Reserve to establish
a clearer market direction.
Bullion <XAU=> rose as high as $1,012.30 an ounce and was at
$1,003.60/1,004.00 at 1522 GMT, against $1,001.00/1,001.80 late
in New York on Monday.
It spiked to an historic high of $1,030.80 on Monday on
concerns over the U.S. financial sector and a weak dollar before
profit-taking erased most of the gains.
"In general, gold's moves are related to the dollar and oil.
Watch the euro, watch the oil price and also watch the quarterly
results of banks," said Wolfgang Wrzesniok-Rossbach, head of
sales at Heraeus, a German precious metals trading group.
"Gold is trading in a range, but at a pretty high level. I
don't see it is going above the record level for the time being,
but also no immediate crash here," he added.
The dollar traded near record lows against the euro on
expectations of a hefty Fed rate cut that will make the U.S.
currency the second lowest yielder among the G10 economies.
Expectations of rate cuts have deepened after JPMorgan's
<JPM.N> purchase of stricken rival Bear Stearns <BSC.N> for a
rock-bottom $2 a share and the Fed's emergency step of cutting
its discount rate by 25 basis points on Sunday.
The dollar remained under pressure, although it rebounded
against the yen after stronger-than-expected results from
Goldman Sachs <GS.N> and Lehman Brothers <LEH.N> eased concerns
about the health of the U.S. financial sector.
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 rebounded on expectations that the U.S. rate cut
will hit the dollar and spur investment demand for oil.
"The market is likely to continue to hold around yesterday's
close ahead of the Fed rate meeting," said Suki Cooper, precious
metals analyst at Barclays Capital.
"The current environment -- inflation concerns, equity
market movements and the general credit market concerns -- is
boosting prices, but the metal is primarily taking its lead from
the dollar movement."
FED MEET AWAITED
Gold has gained more than 23 percent this year on fears of
inflation as crude oil has hit records, expectations of further
rate cuts and deepening U.S. financial concerns.
"If the Fed believes that in the due time economic crisis
can be contained, then there could be marginal respite for
dollar," said Pradeep Unni, analyst at Vision Commodities.
"Gold uptrend is intact, but there are high chances of a
pull back after the decision. It is ideal to wait before fresh
buying is attempted. High volatility is also likely," he said in
a daily market note.
High prices continued to hit physical demand. Gold imports
by India, the world's largest consumer, plunged to 10 tonnes in
February from 59 tonnes in the same month a year ago.
In other metals, platinum <XPT=> hit a 1-week low of $1,935
an ounce before rising to $1,990/2,000, against $1,980/1,990 in
New York and off a record high of $2,290 hit on March 4 on a
power crisis which hit mining in main producer South Africa.
Platinum was supported by news that South African power
utility Eskom may have to inform mines of a force majeure if
more of its generators trip, Eskom spokesman Andrew Etzinger
told Reuters. []
Silver <XAG=> traded at $19.95/20.00 an ounce, versus
$20.35/20.41 in New York, while spot palladium <XPD=> rose
nearly 3 percent to $478/488 an ounce from $465/470.
(Additional reporting by Atul Prakash in London)
(Editing by Peter Blackburn)
