LONDON -- Gold ended lower by afternoon in New York on Monday, tracking weaker oil prices, but dealers said the market could rally later this year.
Prices had fallen three percent in a week from an 11-month high of $693.60 an ounce, but a weaker dollar outlook would revive gold's appeal to investors.
Gold fell as low as $674.40 an ounce before rising to $678.20/678.70 by 3:25 p.m. EDT (1925 GMT), against $681.30/681.80 in New York late on Friday, when it gained nearly $7 on news of a foiled al Qaeda-linked plan to attack Saudi Arabia's oil facilities.
Most-active gold for June delivery on the COMEX division of the New York Mercantile Exchange settled up $1.70 at $683.50 an ounce, traded in a tight $6-range from $678.80 to $684.90.
"We are building a base around $675. Energy prices are a bit softer today and there is some pressure coming from the dollar," a European analyst said.
Story Continues Below
The dollar fell toward record lows against the euro, on track for the largest monthly decline since November. A lower greenback makes dollar-denominated assets like gold cheaper for investors holding other currencies.
"The market is a bit shaky here. Physical activity remains sound at this stage, but we have some hesitation and expect consolidation somewhere between $675-$682," Frederic Panizzutti, analyst at MKS Finance, said.
"Short-term dollar strength might add a bit of pressure and reduce buying interest," he said, adding he did not expect further selling.
U.S. oil futures ended down 75 cents at $65.71 a barrel on Monday. Gold is generally seen as a gauge of oil-led inflation.
Business was thin in Asia as the Tokyo market is closed on Monday, Thursday and Friday for Japanese holidays, while trading in China's markets is expected to be slow during a week-long May day holiday period.
BULLISH VIEW
Analysts remained confident gold would strengthen this year.
"We still see gold higher in 2007, expecting an average of $700/oz, helped by a weaker dollar and still firm commodity prices," John Reade of UBS Investment Bank said in a report.
Barclays Capital said in a report that all key factors pointed toward a further rise in prices.
"We maintain our positive outlook on gold for 2007 and expect prices to peak in the third quarter with an average gold price of $710."
Silver dipped to $13.40/13.45 an ounce from its previous finish of $13.54/13.57 in New York.
In the platinum group metals, platinum rose to $1,290/1,295 an ounce from $1,286/1,291 late in the U.S. market on Friday. Palladium was down $1 at $369/373 compared with its previous close in New York on Friday.
As of last Tuesday, net long positions in palladium on the COMEX division of the New York Mercantile Exchange surged to an
all-time high of 1.35 million ounces. Positions across other precious metals also increased.
© Reuters 2007. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters.
Editor's note:
Four Gold Picks Set to Skyrocket in 2007 - Get Them Now
Four Digit Gold Prices a Reality - Find Out How
1200% Gains in 42 Days -- Find Out How
