(Updates with quotes, prices)
By Atul Prakash
LONDON, Jan 23 (Reuters) - Gold pared most of its losses in
volatile trade on Wednesday on safe-haven buying and bargain
hunting at lower price levels, traders said.
Longer-term sentiment remained strong and the metal was
expected to exceed this year's historic highs of $914 an ounce.
Gold <XAU=> fell as low as $876.40 an ounce before climbing
to $895.60. The metal was quoted at $887.20/887.90 by 1638 GMT.
It closed at $890.30/891.00 in New York on Tuesday, when
prices tumbled to a 3-week low of $849.50 before a surprise rate
cut by the U.S. Federal Reserve sparked a rebound to $894.30.
"Initially we saw it off with weaker stocks. Although there
may be some flight-to-cash selling around, increasingly people
need some kind of safe-haven to cling to," said Simon Weeks,
director of metals trading at Bank of Nova Scotia.
"I think the dip to $850 was your last chance for a while to
buy some 'cheap' stuff."
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.
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.
"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."
A Reuters global poll of 50 traders and analysts showed
average gold prices will surge more than 20 percent this year
and retain most gains in 2009 as dollar weakness, market turmoil
and inflation fears stoke investor interest. []
OIL PRICES WEIGH
But analysts said weaker oil prices might weigh on the
metal, traditionally seen as a hedge against oil-led inflation,
in the coming days.
Oil fell below $88 a barrel as stock markets fell further,
shrugging off a temporary reprieve from Tuesday's steep cut in
U.S. rates amid persistent fears of a global economic slowdown.
Britain's leading shares slipped more than 2 percent, while
U.S. stocks slid at the open on recession worries and a weak
profit outlook from iPod maker Apple Inc <AAPL.O> as the Nasdaq
composite index crossed a bear market threshold.
"From here, gold's correction appears to have run its course
for now, although if the dollar is set to rally ... then the
metal could come under renewed pressure soon," said John Reade,
head of metals str
