Gold ends lower as oil losses weigh
NEW YORK/LONDON (Reuters) - Gold ended lower on Monday, giving up overnight gains due to retreating crude prices, but a further oil rally may help bullion defy declines in demand from jewelers and other physical buyers.
Meanwhile, silver finished nearly 2 percent higher in spite of gold's decline, as buy-stops accelerated gains after prices breached above resistance level, floor traders said.
Gold hit a high of $889.10 an ounce before slipping to $884.60/886.00 an ounce by New York's last quote at 2:15 p.m. EDT, down from $886.30/888.30 in New York late on Friday, when it jumped to a 10-day high of $889.80.
Gold has lost more than 14 percent in value since spiking to a record high at $1,030.80 an ounce on March 17. It tumbled to a four-month low at $845 in early May.
U.S. crude futures ended down nearly $2 at just above $124 a barrel after initially setting a record high of $126.40 a barrel.
James Steel, metals analyst at HSBC in New York, said that oil's weakness was a dominating factor for gold's decline amid quiet trade.
Steel said the future direction of crude oil could still definitely influence the price outlook of gold.
In the past two months, gold prices have failed to move higher in spite of a sharp rally of crude oil to record peaks.
Rising energy prices usually lift the metal's appeal as a hedge against inflation.
"Overall, it still feels that ultimately we want to test lower," said Simon Weeks, managing director, precious metals, at Bank of Nova Scotia, adding that gold could fall below $845.
The metal, traditionally seen as a safe haven asset in times of uncertainty, shrugged off news that an earthquake with a magnitude of 7.5 struck Sichuan province in southwest China and killed up to 5,000 people.
"We could see gold prices dip below $850, if physical demand remains soft," said Suki Cooper, precious metals analyst at Barclays Capital.
"But overall, a number of positive drivers are still continuing to underpin gold prices," she said, referring to strong oil prices.
The dollar gave back initial strength to trade lower against the euro, failing to give bullion investors a clear trading signal.
In theory, a firmer dollar reduces makes gold costlier for holders of other currencies and reduces its appeal as an alternative investment.
DEFENSIVE TRADING
Gold slipped below $900 in late April and has since shown little resilience.
"Given the metal's reaction to pockets of dollar strength, it seems gold will find it tough to rally significantly," said James Moore, precious metals analyst at TheBullionDesk.com.
In other markets, the most-active June gold futures contract on the COMEX division of the New York Mercantile Exchange settled 90 cents lower at $884.90 an ounce.
Spot platinum rose to $2,092.50/2,102.50 an ounce from $2,074.00/2,094.00 late in New York on Friday, when it rose to $2,095, the highest since March 17, as the launch of U.S. platinum exchange-traded notes by UBS Investment Bank boosted sentiment.
Silver jumped to $17.12/17.20 an ounce from $16.82/16.88 late on Friday in the U.S. market. Palladium rose to $437.00/445 an ounce from its previous finish of
$432/440.
(Additional reporting by Atul Prakash in London and Risa Maeda in Tokyo, editing by Matthew Lewis)
