Gold up 1 pct on dollar, crude; targets $1,000

By Atul Prakash and Anna Ringstrom

LONDON (Reuters) - Gold prices rose more than 1 percent on Wednesday as a record low dollar and soaring oil prices triggered bullion buying, analysts said.

Gold rose to $981.90/982.70 an ounce by New York's last quote at 2:15 p.m. EDT (1815 GMT) from $971.00/971.80 in New York late on Tuesday, when it fell on a dollar rally after central banks announced plans to boost liquidity. During the session, gold rose as high as $982.00.

"The dollar weakness has helped gold prices," said David Thurtell, analyst at BNP Paribas, adding prices probably would find support around $970-$975 until release of U.S. retail sales and CPI data on Thursday.

"With the market turmoil and the dollar weakness, chances are good that prices can reach $1,000," he said.

The dollar slumped to record lows against the euro and major currencies amid uncertainty about the long-term impact of recent Federal Reserve efforts to boost credit markets.

A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand.

Gold also is seen as a hedge against oil-led inflation. U.S. crude futures settled up $1.17 to $109.92 a barrel, after hitting an all-time high of $110.20 during the session.

Daniel Hynes, metals strategist at Merrill Lynch, said the outlook for gold remained bullish.

"We are expecting the U.S. dollar to come under increasing downward pressure and believe the $1,000-an-ounce mark will be reached pretty soon," Hynes said.

Gold is up about 17 percent since the start of the year, a rally that has dimmed physical buying in key consuming centers, although this week's consolidation around $970 has stirred demand from jewellers in some parts of the world.

"There is a lot of investor interest in gold right now and investor sentiment is the key driver for gold prices, but physical demand holds them down," said Dan Smith, metals analyst at Standard Chartered Bank.

"We expect a broad sideways move in gold prices in the coming months, though long term we are still quite bullish."

SUPPORTING FACTORS

Gold hit a record high of $991.90 on March 6, and dealers said record high oil and expectations of further interest rate cuts in the United States were likely to support the market.

The active U.S. gold contract for April delivery on the COMEX division of the New York Mercantile Exchange settled up $4.50 to $980.50 an ounce.