(Recasts, updates with closing prices, market activity, adds
NEW YORK to dateline)
By Frank Tang and Atul Prakash
NEW YORK/LONDON, Jan 7 (Reuters) - Gold drifted further away
from its recent record highs on a sharp drop in oil prices and a
rebound in the dollar, but analysts said on Monday that
sentiment was still positive.
Concerns about U.S. economic growth, expectations for
further interest rate cuts and geopolitical tensions were likely
to keep prices well-supported, with investors keen to buy on
price dips, they said.
"Gold is struggling to go to its all-time highs. It's more
likely for the metal to touch $830 an ounce before it goes to
$875 as we tend to get corrections after rapid run-ups," said
Matthew Turner, precious metals analyst at Virtual Metals.
"But it's hard not to be bullish in the medium term. I think
2008 would be a positive year for gold."
Gold <XAU=> fell as low as $855.20 an ounce and was quoted
at $857.70/858.40 at 3:45 p.m. EST (2045 GMT), against
$862.00/862.70 late in New York on Friday and last week's
historic high of $869.05. It surged 32 percent in 2007 and has
gained 4.5 percent this year.
The dollar rose after losses the previous session, as
investors trimmed bets against the currency given persistent
U.S. inflation pressures that may prevent the Federal Reserve
from cutting interest rates aggressively.
A firmer dollar makes gold costlier for holders of other
currencies and often lowers bullion demand. The metal is
generally seen as a hedge against oil-led inflation.
Sliding oil prices hurt bullion's appeal as a hedge against
oil-led inflation. U.S. crude oil <CLc1> ended down almost $3 at
$95.09 a barrel on Monday, handing back gains triggered by
reports of fresh tensions between Iran and the United States.
Iranian speedboats swarmed three U.S. warships in the key
Strait of Hormuz over the weekend and made threats via radio,
Pentagon officials said on Monday. []
Stephen Briggs, metals analyst with Societe Generale in
London, told clients in a note that gold prices looked due for a
correction after they tested resistance and failed to clear the
$870 level on a spot basis.
"The majority of the buying interest is still coming from
the professional sector. Traditional "grass roots" buyers have
retreated in the face of high prices and, more importantly,
volatility, and there is, as yet, little sign of their return,"
Briggs said.
OIL, DOLLAR WEIGH
"The combination of lower oil prices and a stronger dollar
may well see the gold price make its first examination of
support at $850," said Tom Kendall, precious metals strategist
at Mitsubishi Corporation.
"However, we expect any dollar rebound against the euro to
be short-lived and look for positive sentiment to come to the
fore again in gold before the end of the week."
In other markets, the U.S. Commodity Futures Trading
Commission said in its latest Commitments of Traders report that
the noncommercial net long position rose to 199,438 lots in the
week up to Dec. 31, from 184,375 lots a week earlier.
[]
John Reade, head of precious metals strategy with UBS in
London, told clients in a note that speculative net longs could
stand at all-time highs in the U.S. futures market after spot
gold scaled a record high last Thursday, and that could prompt
heavy profit taking in the near term.
Meanwhile, trading volume in oil and metals on the Tokyo
Commodity Exchange, Japan's top commodities bourse, jumped about
19 percent on Monday compared with the daily average of last
year after the sessions were extended by two hours.
[]
The benchmark December gold contract in Tokyo <0#JAU:>
closed at a session high of 3,044 yen a gram, down 0.4 percent.
In market news, Turkey's gold imports rose 19.8 percent
year-on-year to 230.8 tonnes in 2007, posting the third-largest
volume recorded, data from the Istanbul Gold Exchange showed.
[]
Platinum <XPT=> fell to $1,530/1,534 from $1,541/$1,545 an
ounce late in New York on Friday, while palladium <XPD=> was
essentially flat at $365/$368. Silver <XAG=> dipped to
$15.11/15.16 an ounce from its previous finish of $15.29/15.34
in the U.S. market.
(Additional reporting by Chikafumi Hodo in Tokyo, editing by
Matthew Lewis)
