UPDATE 4-Gold moves higher as dollar wilts, oil recovers

                                
(Recasts, adds detail/comment, updates prices)
                                
 By Atul Prakash and Jan Harvey
                                
 LONDON, June 2 (Reuters) - Gold firmed on Monday as the
dollar softened against the euro and as oil prices rebounded
from earlier lows.
                                
 Spot gold <XAU=> rose as high as $896.70 an ounce and was
quoted at $896.15/897.35 at 1548 GMT, against $885.95/887.55 in
New York late on Friday, when the metal closed 1 percent higher
after touching a two-week low.
                                
 "The jury is still out on whether the dollar has commenced a
long-term rebound," said David Thurtell, analyst at BNP Paribas,
adding that people were happy to pick up gold on dips.
                                
 Gold tends to follow moves in the crude price, as it is
often bought as a hedge against oil-led inflation.  A weaker
U.S. currency makes dollar-denominated metals cheaper for
holders of other currencies.
                                
 "Dollar weakness/strength and oil prices will continue to be
the main price drivers," Fairfax I.S. said in a note.
                                
 Prices have traded within a relatively narrow range today.
                                
 The precious metal firmed this morning, but retreated from
highs after the dollar climbed in response to the release of
stronger-than-expected manufacturing data from the U.S.
Institute for Supply Management. 
                                
 However, the U.S. currency soon pared its initial gains
against the euro <EUR=>, spurring the precious metal higher.
                                
 
                                
 SILVER EXPOSED
                                
 Meanwhile oil prices gave a further boost to gold, climbing
by more than $1 a barrel after earlier losses. [ID:nSP155466]
                                
 Crude <CLc1> is benefiting from strong technical support and
a healthy market for natural gas and refined oil products.
                                
 However, the gold market is expected to remain largely
rangebound in the near future, analysts said. 
                                
 "At the moment, physical demand is not very strong and in
the summer, investment demand is not strong either," said Lehman
Brothers analyst Michael Widmer.
                                
 In other bullion markets, gold futures for August delivery
<GCQ8> on the COMEX division of the New York Mercantile Exchange
rose $2.1 an ounce to $893.60 an ounce in electronic trading.
                                
 Among other metals, silver <XAG=> tracked gold higher to
trade at $16.89/16.96 an ounce, up from $16.80/16.86. In the
medium term, however, analysts said they expect prices to
correct further.
                                
 "We believe silver prices are exposed to downside risks over
the forthcoming months in light of the buoyant mine supply
growth projected to come online this year," Barclays Capital
analysts said in a note earlier today.
                                
 Spot platinum <XPT=> rose to $2,009.50/2,029.50 an ounce
from $1,987.50/2,007.50 in New York late on Friday, while
palladium <XPD=> rose to $432.50/440.50.
                                
 Analysts expect platinum prices to be underpinned by the
power crisis in South Africa, the world's largest producer of
the metal used in autocatalysts, which has hit output.
                                
 The latest news came from London-listed Aquarius Platinum
<AQP.L>, which said it lost 1,300 ounces in platinum group
metals after workers at its Everest mine in South Africa downed
tools in an illegal strike last week. [ID:nWEA8515]
                                
 (Reporting by Jan Harvey; editing by David Evans)
 (jan.harvey@thomsonreuters.com; +44 20 7542 7744; Reuters
Messaging: jan.harvey.reuters.com@reuters.net))