Gold ends higher on record oil but caution reigns

By Frank Tang and Atul Prakash

NEW YORK/LONDON (Reuters) - Gold ended higher on Monday as oil hit a record high and physical demand rebounded, but investors remained cautious ahead of this week's meeting of the U.S. Federal Reserve on interest rates.

Bullion rose as high as $895.80 an ounce and was at $891.65/892.65 by New York's last quote 2:15 p.m. EDT, against $886.90/888.30 in New York late on Friday.

U.S. gold futures for June delivery on COMEX division of New York Mercantile Exchange settled up $5.80 at $895.50 an ounce.

Gold was supported by strong oil prices, but analysts said bullion's upward movement was not as impressive as last month when soaring oil and a record low dollar propelled gold to a lifetime high of $1,030.80 on March 17.

"Sentiment towards gold is not nearly as bullish as it was, not least because the outlook for the dollar is considerably less bearish," said Tom Kendall, metals strategist at Mitsubishi Corporation.

"If we get more positive U.S. data this week that surprises on the upside, or if the tone of the statement following the Fed meeting gives people confidence that it has come to the end of its interest rate easing cycle, then it would not be surprising to see gold pushed lower."

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 a surging oil market lifted gold's appeal as a hedge against inflation.

Oil hit a record near $120 a barrel, boosted by a string of bullish factors including disruption of Nigeria's output and a UK refinery strike, highlighting anxieties over supplies. U.S. crude futures settled up 23 cents at $118.75 a barrel.