UPDATE 8-Gold ends higher on record oil, outlook cautious

(Recasts, updates with closing prices, market activity, adds NEW YORK to dateline)

By Frank Tang and Atul Prakash

NEW YORK/LONDON, May 6 (Reuters) - Gold ended higher on Tuesday as record-high oil prices lifted bullion's appeal as an inflation hedge, but investors remained cautious after a recent sell-off to four-month lows.

Gold's long-term bull trend remained in place, dealers said, although it was seriously dented by heavy losses last week.

Spot gold <XAU=> was at $877.40/878.60 an ounce by New York's last quote at 2:15 p.m. EDT (1815 GMT), up from $871.15/872.55 in New York late on Monday but still well below a record high of $1,030.80 hit on March 17.

"We saw a fairly big retracement last week and there was a feeling that probably it was overdone. There has been some buying as support is coming back in," said Daniel Hynes, metals strategist at Merrill Lynch.

"But it doesn't look strong enough to really kick-start a sustained upward trend. The effect of oil is less than we have seen in the past. It may continue to trade in a fairly tight range and struggle to push above $900 in the short term."

U.S. crude futures CLc1 surged to a record high $122.73 a barrel, the latest spurt in an advance that has seen prices double over the past 12 months.

Oil could shoot up to $200 within the next two years as part of a "super-spike" driven by poor growth in oil supplies, investment bank Goldman Sachs said in a research note. [ID:nL06914488]