UPDATE 5-Gold ends lower on dollar gains, oil cushions fall

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

By Frank Tang and Atul Prakash

NEW YORK/LONDON, May 7 (Reuters) - Gold ended lower on Wednesday as a sharp rise in the dollar prompted investors to take profits, but strong oil prices limited declines.

Spot bullion <XAU=> traded as high as $881.05 an ounce earlier in the day, but was at $870.85/872.05 by New York's last quote at 2:15 p.m. EDT (1815 GMT), against $877.40/878.60 late in New York on Tuesday and a record high of $1,030.80 on March 17.

"Profit-taking is driving things ... but the market is holding because of oil, which has been hitting a new record every day," said Adrien Biondi, global head of precious metals at Commerzbank.

"I think if oil wouldn't be as high, gold would be lower," he said.

U.S. gold futures for June delivery GCM8 on the COMEX division of New York Mercantile Exchange settled down $6.50 at $871.20 an ounce.

Jonathan Jossen, a COMEX floor trader in New York, said that the dollar's rally was a main factor dragging gold lower.

"The next support level (for the June contract) will be between $851 and $853, but I don't think it's going to happen though. You have to see the dollar up sharply to get there, I think," said Jossen.