Gold ends higher on inflation fears as oil rises
NEW YORK/LONDON (Reuters) - Gold ended higher but off its session peak on Tuesday after key U.S. data prompted bullion investors to trim trading positions, but record-high oil prices underpinned the market.
The metal, seen as a hedge against oil-led inflation and an alternative investment to the U.S. currency, climbed to a high of $936.50 an ounce and was at $927.60/928.40 by New York's last quote at 2:15 p.m. EDT, against $925.30/926.10 late in New York on Monday.
"Oil is clearly a factor. Technically also, gold looks better because it broke through a weak trend line resistance," said Michael Jansen, analyst at J.P. Morgan Securities.
"But I think we will continue to consolidate. The recovery from under $900 is not hugely convincing and there are still concerns that the physical market is very subdued. Overall, we will tend to trade in the $900-$950 range for a bit longer."
U.S. crude futures ended up $2.03 at $113.79 a barrel, after setting a record high of $113.99 earlier. It has been up about 18 percent from the start of the year and is averaging near $100.
But gains in bullion prices were limited as the dollar rose after data showed a bigger-than-expected rise in U.S. producer prices last month, suggesting the Federal Reserve may not continue cutting interest rates quite so aggressively.
A firmer dollar makes gold costlier for holders of other currencies and often lowers bullion demand.
"We expect the next target to be around $950. Still, it might take a bit of time to reach that level. The market remains shy after the recent price correction," Frederic Panizzutti, metals analyst at MKS Finance, said.
Gold slipped to a two-month low of $872.90 an ounce in early April after hitting a record high of $1,030.80 on March 17 in a broad commodities sell-off, triggered by a rise in the dollar and some weakness in oil prices.
TECHNICAL RESISTANCE
Analysts said gold may hover in a range in the near term, but had potential to gain substantially in the long run.
"Gold still has to overcome strong technical resistance," said James Moore, precious metals analyst at TheBullionDesk.com.
"But given the ongoing recessionary/inflationary fears and liquidity issues dogging the credit market, we remain bullish in the mid- to longer-term and expect gold to reclaim $1,000 later in the year," he said in a market report.
Investors awaited the U.S. March consumer price index on Wednesday for the dollar's direction, which may affect gold.
In the physical sector, purchases from India, the world's largest gold consumer, kept the physical market alive during the wedding season, but wild swings in bullion prices crimped demand in other parts of Asia.
In other markets, U.S. gold futures for June delivery GCM8 settled up $3.30 at $932 an ounce.
Spot platinum rose to a high of $2,000 an ounce and was last quoted at $1,970/1,980 from its previous finish of $1,958/1,968 on Monday. Silver edged up at $17.79/17.84 an ounce from Monday's close of $17.78/17.83 an ounce, and palladium fell $12 to $447/452 an ounce.
(Additional reporting by Alastair Sharp in London, editing by Matthew Lewis)
