(Updates with quotes, prices)
By Atul Prakash
LONDON, April 21 (Reuters) - Gold steadied in Europe on
Monday after gaining overnight on record high oil prices, with
investors trading cautiously after Friday's sharp sell-off.
The metal's failure to hold above $950 an ounce since
hitting an historic high of $1,030.80 on March 17 also lowered
market sentiment, analysts said.
Gold <XAU=> rose as high as $928.50 an ounce and was quoted
at $916.60/917.60 at 1416 GMT, against $916.40/917.20 late in
New York on Friday, when it touched a one-week low of $904.35.
"It appears that the market is consolidating here. Perhaps
people are cautious, but the market hasn't collapsed in any way
and still holding significantly high levels," Peter Hillyard,
head of metals trading at ANZ Investment Bank, said.
"I don't think we will see a much lower level than we have
already seen. Gold is going to hold these levels, somewhere
between $910 and $930," he said.
Investors kept an eye on the energy market for direction.
Oil hit a record high above $117 a barrel because of worries
about supply disruptions from major producers and comments by
OPEC reiterating there was no need to raise output.
Gold is generally seen as a hedge against oil-led inflation.
The metal also moves in the opposite direction of the dollar, as
a weaker U.S. currency makes gold cheaper for holders of other
currencies and often lifts bullion demand.
The dollar fell broadly after weaker-than-expected Bank of
America profits damped investors' initial optimism that
companies may escape the pinch of the crisis in global credit
markets. []
Analysts said BoA's results suggested the fallout from the
credit crisis may not be over as some have speculated, chilling
risk appetite as such problems were expected to continue
weighing on the U.S. economy and the dollar.
"Gold is really struggling to make much headway after
Friday's fall. It wouldn't be a surprise to see a test of the
downside support around $905," Tom Kendall, metals strategist at
Mitsubishi Corporation, said.
"Some of this week's earnings reports from the U.S. could
influence sentiment, and if we do go down below $900 on a
closing basis, then a test of around $885 would probably follow.
"Oil doesn't want to go down right now, but sooner or later
it is likely to see more substantial correction," he said.
GOLD VULNERABLE
U.S. gold futures gained, with the most active contract for
June delivery <GCM8> rose $4.70 to $919.90 an ounce.
"Short-term, gold looks set to spend more time in the
$900-$930 area and remains vulnerable to a test back towards the
April 1st low of $872 as speculators continue to take profit in
order to increase their cash liquidity," said James Moore,
analyst at TheBullionDesk.com.
In industry news, Peter Hambro <POG.L>, the second-largest
gold miner in Russia, announced its first dividend as it posted
a 20 percent rise in 2007 profit on higher output and prices.
The firm said in January that 2007 gold output climbed 14
percent to 297,300 ounces. It reiterated a target to boost
output to between 350,000 ounces and 400,000 ounces this year.
Gold miners cut their hedging positions by 8 percent to
26.86 million ounces in the fourth quarter of 2007 from the
previous three months, with the full year decline setting a
record of 14.34 million, a report said. []
But the quarterly report by Societe Generale and metals
consultancy GFMS Ltd. said there was increasingly limited scope
for a significant reduction in the global hedge book in 2008.
The Swiss National Bank's gold holdings fell by 313,200
ounces to 35.79 million ounces in March. []
Spot platinum <XPT=> fell to $2,020/2,030 an ounce from
$2,035/2,050 late on Friday. Palladium <XPD=> was up $5 at
$455/460 an ounce, but silver <XAG=> declined nearly 2 percent
to $17.52/17.57 an ounce from $17.87/17.92 late on Friday.
(Reporting by Atul Prakash; editing by Peter Blackburn)
