(Updates with quotes, prices)
By Atul Prakash
LONDON, April 28 (Reuters) - Gold drifted higher on Monday
as oil roared to a record high near $120 a barrel but investors
remained cautious ahead of this week's meeting of the U.S.
Federal Reserve on interest rates.
Bullion <XAU=> rose as high as $894.25 an ounce and was
quoted at $890.40/891.10 at 1408 GMT, against $886.90/888.30 in
New York late on Friday.
Gold was supported by strong oil prices, but analysts said
bullion's upward movement was not as impressive as it was last
month when soaring oil and a record low dollar propelled gold to
a lifetime high of $1,030.80 on March 17.
"Sentiment towards gold is not nearly as bullish as it was,
not least because the outlook for the dollar is considerably
less bearish," said Tom Kendall, metals strategist at Mitsubishi
Corporation.
"If we get more positive U.S. data this week that surprises
on the upside, or if the tone of the statement following the Fed
meeting gives people confidence that it has come to the end of
its interest rate easing cycle, then it would not be surprising
to see gold pushed lower."
The metal has fallen 13 percent since then and has been
struggling to regain $900. It hit a three-week low of $877.60 on
Friday before a surging oil market lifted gold's appeal as a
hedge against inflation.
Oil hit a new record near $120 a barrel, boosted by a string
of bullish factors that include big disruptions to Nigeria's
output and a UK refinery strike.
"I do expect gold to drift around $900 for a little while,
until we really see another strong shift in sentiment. Even the
spike in oil is failing to really fire up the gold market," said
Daniel Hynes, metals strategist at Merrill Lynch.
"After such a good run, a lot of people took the opportunity
to liquidate, but the general trend would be for rising prices
in the medium- to long-term," he said.
FED MEETING AWAITED
In the currency market, the dollar marginally gained against
the euro after slipping earlier in the day with trading largely
on hold ahead of the Federal Reserve's meeting on Wednesday.
The Fed has slashed borrowing costs in response to the
credit crisis that erupted last year, but some speculate that
climbing fuel and food prices could prevent any more big cuts.
A rate cut tends to weaken the dollar and lift gold demand,
as the metal is seen as a an alternative investment and often
moves in the opposite direction of the U.S. currency.
But the metal's long term outlook remained positive.
"Sluggish mine supply, weak equity/property markets and
a low U.S. dollar should see gold trade in a $800-$1,050
range over the next six months, before it weakens significantly
in 2009," said David Thurtell, metals analyst at BNP Paribas.
Gold futures for June delivery <GCM8> on the COMEX division
of the New York Mercantile Exchange rose $3.30 an ounce to
$893.00 an ounce.
In industry news, Russia's Highland Gold Mining Ltd <HGM.L>
said it recorded a profit of $18.1 million in 2007, reversing a
$94.9 million loss in 2006. It produced 156,474 ounces of gold
in 2007 and sold 150,427 ounces at an average price of $708 per
ounce. []
In other metals, platinum <XPT=> rose to $1,958/1,968 an
ounce from $1,944/1,964 late on Friday and silver <XAG=> gained
to $16.91/16.97 an ounce from $16.83/16.89. But spot palladium
<XPD=> fell $3 to $432.50/438.50 an ounce.
(Reporting by Atul Prakash; editing by Chris Johnson)
