(Recasts, updates prices and comments)
By Tamora Vidaillet
LONDON, April 30 (Reuters) - Gold bounced from a three-month
low on Wednesday as investors covered short positions and bought
into dips on the back of a softer dollar and higher oil prices.
But analysts and traders saw limited upside for gold as the
market did not want to make big bets ahead of a key decision on
U.S. interest rates by the Federal Reserve later in the day.
Spot gold <XAU=> was at $874.80/875.80 an ounce at 1348 GMT,
from $873.55/874.75 an ounce late in New York on Tuesday and up
from a three-month low of $862.30 an ounce it touched earlier in
the day.
"The dollar's weakening a bit, and oil prices have edged up,
which seems to be helping gold bounce back," said analyst Eugen
Weinberg at Commerzbank said.
Oil edged higher near $116 a barrel ahead of U.S. inventory
data expected to show a decline in domestic gasoline stockpiles.
The euro <EUR=> climbed to around $1.5570 after falling to
$1.5518 due to stronger than expected U.S. first quarter GDP
data.
A surprise rise in private-sector jobs this month along with
data showing the U.S. economy grew at a higher-than-expected
pace initially fuelled further dollar buying. But some of the
dollar's gains came off as details on U.S. gross domestic
product were not as positive as the headline number suggested.
Analysts expected few fireworks ahead of Fed decision.
"I think the market is being driven by month-end liquidity
and the Fed tonight," said an analyst from MKS Finance.
"Gold could trade sideways but I think the profit-taking
will continue and that the lack of confidence in gold is going
to increase," he said.
The Fed is expected to unveil its decision to trim interest
rates by a modest quarter percentage point at around 1815 GMT on
Wednesday. Analysts say it may also suggest the rate-cutting
cycle it kicked off last autumn has reached an end.
NEW CATALYST
Any pause in trimming rates would theoretically support the
dollar and reduce gold's appeal as an alternative investment.
But analysts revealed divisions towards the outlook for gold
prices, with some expecting the metal to witness bursts of
physical demand following heavy price declines in recent weeks.
Gold has lost more than 15 percent in value since spiking to
a record high at $1,030.80 on March 17, but the drop has
attracted physical buying from jewellers.
In the physical sector, jewellery makers from India to
Indonesia have snapped up purchases of bullion after it dived to
lower levels, pushing up premiums for gold bars in Southeast
Asia. []
Expectations of further declines in the dollar over the
coming three months should help support gold prices, said Suki
Cooper, precious metals analyst at Barclays Capital.
"I don't think we will see a dramatic rally in gold unless a
new catalyst emerges but the overall environment remains quite
positive, and physical buying emerging on price dips should keep
prices underpinned," she said.
Spot platinum <XPT=> fell to $1,907.00/1,922.00 an ounce
from $1,918/1,938 late on Tuesday.
Silver edged down to $16.49/16.54 an ounce from $16.51/16.59
an ounce. Spot palladium dropped to $414.00/420.00 an ounce from
$421/429 an ounce.
(Additional reporting by Humeyra Pamuk in London and Lewa
Pardomuan in Singapore)
(Reporting by Tamora Vidaillet; editing by Chris Johnson)
