* Gold ends higher as record crude oil offsets profit
taking
* Traders eye ECB rate decision, Trichet inflation outlook
* Volatility could rise due to shortened U.S. trading week
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Jan Harvey and Frank Tang
LONDON/NEW YORK, July 2 (Reuters) - Gold ended higher on
Wednesday, with record crude oil and weakness in the dollar
lifting bullion after investors took profits early in the
session.
Gold <XAU=> traded $942.60/943.60 by New York's last trade
at 2:15 p.m. EDT (1815 GMT) against $938.40/939.40 late in New
York. It rallied to a high of $945.80 an ounce on Tuesday, its
strongest since April 18.
The precious metal slipped this morning as the dollar
recovered from two-month lows against the euro, fueling
profit-taking after Tuesday's 10-week high.
However, the U.S. currency softened once more after a
report showed the U.S. private sector shed more jobs than
expected in June, lifting gold. []
The precious metal has bounced more than 7 percent since
falling to a one-week low at $873.50 an ounce last week, mainly
driven by rising oil prices.
Higher oil prices tend to benefit gold, as they stoke
concerns over inflation -- against which gold is bought as a
hedge -- as well as increasing the appeal of commodities as a
whole.
U.S. crude futures <CLc1> scaled a record high $143.97 a
barrel after a government report showed U.S. crude inventory
fell last week to their lowest level since January. They
settled up $2.60 at $143.57 a barrel.
Traders were turning their attention to an interest rate
decision by the European Central Bank on Thursday, and to ECB
President Jean-Claude Trichet's outlook for inflation after the
meeting, for clues as to the future direction of the euro.
Any upward move in the euro against the dollar is likely to
support gold, which is often bought as an alternative
investment to the U.S. currency and moves in the opposite
direction to it.
The ECB is expected to raise rates a quarter-point to 4.25
pct in a bid to fight inflation. []
"The markets broadly expect a 0.25-basis-point rise from
the ECB, but the question is what emphasis Trichet will put on
inflation after the meeting, and how the markets interpret that
as it regards future interest rate activity by the ECB," said
Kendall.
However, with the euro already very firm against the
dollar, Thursday's rate decision may already be priced in,
leaving the single currency -- and gold -- in danger of a
correction.
U.S. commodities markets will be shut on Friday for the
U.S. Independence Day holiday.
Jon Nadler, senior analyst at Kitco Bullion Dealers told
clients in a note that a shortened trading week may contribute
to higher volatility in the near term, but price movements of
bigger magnitude could only be expected next week.
The August gold contract <GCQ8> on COMEX division of New
York Mercantile Exchange settled up $2.00 at $946.50 an ounce.
Among other precious metals, silver <XAG=> climbed to
$18.32/18.39 an ounce from $18.08/18.13 late in New York on
Tuesday, when it rallied as high as $18.19, its loftiest level
since May 27.
Prices are taking support from strike action in Peru, the
world's biggest silver miner.
"The mining strike in Peru continues to impact silver
production and Buenaventura has confirmed that all production
at its Uchucchacua mine has been brought to a halt," said
Barclays Capital in a note.
"However, given the vast number of new silver projects due
to come online this year, we still expect silver production to
rise year-on-year," it said, adding that the mine produced 9.9
million ounces of silver in 2007.
Spot platinum <XPT=> ended slightly down at
$2,065.50/2,085.50 an ounce from $2,069.00/2,089.00 late in New
York.
Spot palladium <XPD=> was little changed at $463.00/471.00
an ounce from its previous finish of $464.00/472.00 an ounce.
(Editing by Christian Wiessner)
