(Recasts, adds analyst comments, updates prices, adds NEW YORK
to dateline)
By Frank Tang and Atul Prakash
NEW YORK/LONDON, March 31 (Reuters) - Gold turned to finish
sharply lower on Monday due to sliding crude oil prices and a
bounce of the dollar, but strong investment buying should propel
bullion in the near term, dealers said.
Spot metal <XAU=> was at $916.20/917.00 an ounce by New
York's last quote of 2:15 p.m. EDT (1815 GMT), after surging to
a session high of $940.80.
It was sharply below $931.80/932.60 late in New York on
Friday, when it dropped more than 2 percent on falling crude oil
prices.
A $4 drop in energy prices dented gold's appeal as a hedge
against oil-led inflation. U.S. crude futures <CLc1> settled
down $4.04 at $101.58 a barrel.
The dollar also erased initial losses following
higher-than-forecast euro-zone price data. A higher dollar makes
gold more expensive for investors holding other currencies.
The outlook for euro-zone rates contrasts with the United
States where the Federal Reserve is widely expected to continue
to cut the rate to try to stoke economic growth. Higher rates
tend to lure investors and lift demand for a currency.
"We are seeing a range trading here. The market is too shy
to test $950. Each time we move higher, we see some profit
taking," said Frederic Panizzutti, analyst at MKS Finance.
"We need some new factors in the market to see a break of
$950. There is some willingness to move higher, but the market
lacks a catalyst to motivate larger players to get back into the
market," he said.
Also, strong investment buying should propel bullion higher
in spite of a drop in physical demand after gold's rally to
record prices, market-watchers said.
"The gold story now is an investment story. Right now I
think gold is behaving more as a currency, more as an
investment, and more as an asset class. So the jewelry demand
isn't such a factor," said Caesar Bryan, portfolio manager of
GAMCO Gold Fund in New York, whose asset under management was
$610 million.
Bryan said that the easing global monetary policy and market
fears because of the ongoing credit crisis should propel gold to
record highs in the near term.
U.S. DATA AWAITED
The market is awaiting a jobs report on Friday for
direction. U.S. employers are expected to have cut payrolls for
a third straight month during March. The data may offer more
clues on the state of the economy and the interest rate
outlook.
Gold has lost more than 9 percent since spiking to an
all-time high of $1,030.80 an ounce on March 17. Record-high oil
and expectations of further interest rate cuts in the United
States had propelled bullion to the record-high levels.
"Concerns about a slowing U.S. economy and the financial
stability of major institutions continue to affect broader
investor sentiment, with the precious metals benefiting from the
uncertainty," said Tom Kendall, metals strategist at
Mitsubishi.
"In this environment, gold should test the $950 level again
sooner rather than later."
Analysts said gold's fundamentals were intact amid supply
constraints -- heightened recently by a power crisis that has
disrupted mining in South Africa, the world's main platinum
producer and the second-largest gold producer.
"Fundamentally, lower production out of South Africa and
expected stronger demand out of India and China should see gold
prices recover in the autumn, if not earlier," Fairfax
investment bank said in a daily report.
U.S. gold futures for June delivery <GCM8> on the COMEX
division of the New York Mercantile Exchange settled down $15,
or 1.6 percent, at $921.50 an ounce.
In other metals, platinum <XPT=> rose to $2,005/2,025 an
ounce from $2,000/2,010 late in New York on Friday, while silver
<XAG=> firmed to $17.25/17.30 an ounce from its late U.S. finish
of $17.88/17.93. Spot palladium <XPD=> dropped to $438/443
compared with its Friday close of $441/449 in New York.
(Editing by Matthew Lewis)
