(Recasts with quotes, prices, changes dateline, pvs SINGAPORE)
By Atul Prakash
LONDON, Jan 23 (Reuters) - Gold weakened on Wednesday as a
slight rise in the dollar and weaker oil prices forced investors
to trade cautiously, putting in jeopardy gains made after the
U.S. Federal Reserve cut interest rates on Tuesday.
But longer-term sentiment remained strong and the metal was
expected to exceed this year's historic highs of $914 an ounce.
Spot gold <XAU=> fell as low as $884.70 an ounce and was
quoted at $885.60/886.30 by 1114 GMT. The metal closed at
$890.30/891.00 in New York on Tuesday, when it tumbled to a
three-week low of $849.50 before a surprise rate cut by the U.S.
Federal Reserve sparked a rebound to $894.30.
"Gold prices benefited from yesterday's rate cut, and
further cuts in addition to inflationary fears and concerns
about growth of the economy are likely to buoy prices in
forthcoming months," said Suki Cooper, analyst at Barclays
Capital.
"But we would not rule out a short term price correction."
Gold, which moved in a range of more than $40 on Tuesday,
has lost nearly 3 percent since hitting a record high of $914 in
January, as sliding energy and global equity prices forced
investors to sell the metal to cover margin calls.
In other markets, the benchmark gold futures contract
<0#JAU:> on the Tokyo Commodity Exchange rose by the daily 120
yen per gram limit after the Fed's rate cut lifted sentiment. It
ended at 3,071 yen, up 117 yen from Tuesday's close.
COMEX gold futures gave up gains after rising 1 percent
overnight. The most active February contract <GCG8> lost $3.3 an
ounce to $887.00 an ounce.
"Short-term, rallies in gold may run into further pockets of
profit taking," James Moore, precious metals analyst at
TheBullionDesk.com, said in a daily note.
"However with interest rates in decline, gold is likely to
see further investor inflows as traders seek assets offering
both safe-haven qualities and strong returns."
The Federal Reserve on Tuesday cut benchmark interest rates
by three-quarters of a percentage point -- the biggest rate cut
in more than 23 years -- in an emergency bid to boost a U.S.
economy that some fear is on the verge of recession.
Fed policy makers are scheduled to meet on Jan. 29-30. In
the wake of the central bank's rate cut on Tuesday, financial
markets were expecting the Fed to lower borrowing costs again by
at least a quarter of a point. []
On the production front, South Africa surrendered its crown
as the world's biggest gold producer last year to China, marking
a changing of the guard and confirming analysts' concerns about
the country's dwindling ore grades. []
Platinum <XPT=> was down 50 cents at $1,549.50/1,554.50 an
ounce, but off Tuesday's one-month low of $1,507 an ounce.
More recycled platinum is being used in the manufacture of
jewellery made from the precious metal in Japan, as soaring
prices encourage reselling, Platinum Guild International Chief
Executive James Courage said. []
Silver <XAG=> was at $15.94/15.99 an ounce, versus
$16.01/16.06 in New York, while palladium <XPD=> edged down to
$363/368 an ounce from $366.50/371.50.
(Additional reporting by Lewa Pardomuan in Singapore)
(Reporting by Atul Prakash; editing by Chris Johnson)
