Gold ends up as oil supports, outlook positive

By Frank Tang and Atul Prakash

NEW YORK/LONDON (Reuters) - Gold ended higher on Thursday, near its one-week peak as a late rally of energy prices offset a stronger dollar.

Analysts said sentiment was positive. They said gold, viewed as a hedge against oil-led inflation, may retest the $1,000-mark soon on support from strong oil prices that jumped after an oil pipeline explosion in Iraq.

Spot gold hit a high of $954.50 an ounce before ending at $951.80/952.60 by New York's last quote at 2:15 p.m. EDT, up from $949.00/949.80 in New York on Wednesday. It hit a lifetime high of $1,030.80 an ounce on March 17.

"On the one hand you have high oil prices supporting gold and on the other hand you have got quite a lot of news about the dollar gaining some ground against the euro and other mixed economic data that has taken some shine off gold," metals analyst Robin Bhar at UBS said.

Oil surged above $108 a barrel after saboteurs blew up one of Iraq's two main export pipelines, a Southern Oil Company official told Reuters, adding the country was likely to lose about a third of crude exported through Basra. U.S. crude futures settled up $1.68 to $107.58 a barrel.

The dollar rallied after a government report showed the U.S. economy grew in line with market expectations in the fourth quarter. Demand for the U.S. currency ahead of the end of the first quarter gave the dollar some support after two days of steep losses. That put pressure on gold.

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

"But the market is consolidating, waiting for new direction to come through, and gold would always thrive as a safe heaven and that has not gone away as a factor and it will propel gold again higher in due course," Bhar said.