(Recasts, updates prices, market activity to close; adds new
byline, second dateline, previously LONDON)
By Frank Tang and Atul Prakash
NEW YORK/LONDON, Feb 26 (Reuters) - Gold finished higher on
Tuesday, resuming its rally as crude oil rose, the U.S. dollar
slid and and a report showed rising U.S. producer prices.
But the market remained wary of the possibility that the
International Monetary Fund (IMF) might sell a part of more
than 3,000 tonnes of gold it holds.
Silver hit a 27-year high as investors considered it
relatively cheap against other precious metals, analysts said.
Spot gold <XAU=> closed at $946.60/947.40 by New York's
last quote at 2:15 p.m. EST (1915 GMT), up from $937.80/938.60
in New York on Monday and off last week's record high of
$953.60. During the session, it fell as low as $926.40 and
reached a high of $948.50.
The U.S. gold contract for April delivery at the COMEX
division of the New York Mercantile Exchange <GCJ8> settled up
$8.40 at $948.90 an ounce
A record finish of crude oil futures on Tuesday increased
gold's appeal as a hedge against inflation. U.S. crude futures
<CLc1> settled up nearly $2 at $100.88 a barrel.
The United States said it supported sale of a limited
portion of the IMF's gold stocks and was confident Congress
would support the move. The U.S. Treasury had resisted seeking
Congressional approval. []
"The market is capped because of this IMF sales news. It
would be healthy for the market if it dropped back to low
$900s. Then it has a better chance to make an assault on
$1,000," said Peter Hillyard, head of metals sales at ANZ
Investment Bank.
"The dollar would have to get a lot weaker for the market
to ignore that and just push through," he said, but added that
any price dip or dollar weakness might attract some buying.
The dollar accelerated losses to hit an all-time low
against the euro. In afternoon trade, the euro <EUR=> surged to
a record of $1.4982. A lower dollar makes gold cheaper for
investors holding other currencies.
The IMF is the world's third-largest gold holder, with
3,217 tonnes of reserves. Any sale of IMF gold might be done in
accordance with a European Central Bank gold accord, which
limits total gold sales to 500 tonnes a year, analysts said.
"It is a material development and suggests that it could
actually get through. That's a genuine change because the
market was assuming otherwise," said Stephen Briggs, economist
at SG Corporate and Investment Banking.
"In itself, it won't be a huge thing but it is definitely
something that the market was not expecting."
DIPS ATTRACT BUYERS
The physical market was abuzz with activity as gold's fall
during Asian trade attracted bargain hunters and jewellers,
mainly from Indonesia and Vietnam.
Some analysts said the metal had potential to set new highs
after consolidating its position. It rose 14 percent this year
on the top of 32 percent gains in 2007.
"Strong buying on dips is likely to be witnessed
outweighing temporary liquidations on such news, which are
quite common when there are sharp price rises," said Pradeep
Unni, analyst at Vision Commodities, referring to IMF gold
sales news.
Unni also told clients in a note that countries such as
China, Iran and some European countries could buy more gold to
reduce their reliance on the U.S. dollar in spite of the
bearish IMF news.
In other precious metals, silver <XAG=> rose to $18.65 an
ounce, the highest level since December 1980. It was last
quoted at $18.65/18.70 an ounce, against $18.07/18.12 late on
Monday.
Platinum <XPT=> dropped 2 percent before paring losses. It
fell as low as $2,090 before rising to $2,130/2,140 an ounce,
against $2,135/2,145 late in New York on Monday and a record
high of $2,192. Palladium <XPD=> rose $3 to $523/528 an ounce.
(Editing by David Gregorio)
