Gold softens but stays near record, platinum drops

LONDON (Reuters) - Gold fell on light profit-taking on Thursday, but analysts said the metal remained within sight of record highs and was likely to head towards $1,000 an ounce on bullish sentiment.

Spot gold fell to $955.20/956.10 an ounce at 0550 EST from $957.50/958.30 late in New York on Wednesday, when it hit a record high of $964.70 on tumbling dollar and the prospect of U.S. interest rate cuts.

"We expect several attempts to break the highs we reached in the last couple of days and then move gradually higher," said Frederic Panizzutti, precious metals analyst at MKS Finance.

"Gold should remain pretty well supported. If the dollar weakens further, then definitely we will see an acceleration in the upside trend. We see a range between $950 and $1,000."

The dollar held near a record low versus the euro after a sharp drop in durable goods orders and home sales fuelled recession fears and Fed Chairman Ben Bernanke signaled a readiness to cut interest rates again.

A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.

Oil eased toward $99 a barrel, off the record levels above $102 as bulging crude and gasoline stockpiles in the United States added to the gloom over its weak economy.

"Profit-taking has caused gold prices to ease back, although investment money appears likely to continue and we could see prices climb further," Fairfax investment bank said in a note.

Gold has gained around 16 percent this year on investor demand driven by record high oil prices and the possibility of more interest rate cuts, which has raised the metal's appeal as an alternative investment.

PHYSICAL MARKET

In the physical sector, selling from retail investors in Japan slowed down on expectations there was room for gold to rise further, while dealers in Singapore noted light selling from jewelers in Indonesia and Thailand.

Gold bars were offered at a discount of 25 U.S. cents an ounce to the spot London prices in Tokyo, unchanged from last week.

In other precious metals, silver was off a 27-year high, palladium fell from Wednesday's 6-1/2-year high, while platinum fell more than 2 percent to a one-week low.

Platinum was last quoted at $2,084/2,094 an ounce, down from $2,130/2,140 an ounce late in New York. It hit a record of $2,192 on February 22 as persistent power supply problems disrupted mining in South Africa, the world's top producer.

"We continue to believe that prices will trend higher into the second quarter, but should soften in the second half of this year," Standard Chartered Bank said in a report.

"Some of the short-term problems in South Africa should be overcome by then, and consumption is likely to be dented by higher prices in some sectors such as jewelry. Despite this, platinum is expected to remain fundamentally tight and prices should trend higher once more heading into 2009."

The February 2009 platinum contract on the Tokyo Commodity Exchange tumbled by 240 yen per gram limit to end at 7,107 yen.

Silver fell to $19.12/19.17 from $19.22/19.27 an ounce on Wednesday, when it touched a peak of $19.45. Palladium fell to $541/545 an ounce from $550/555 late in New York.

(Additional reporting by Lewa Pardomuan in Singapore)

(Reporting by Atul Prakash; editing by Chris Johnson)