NEW YORK/LONDON -- Gold prices closed lower Thursday after hitting a 10-day high, as investors unloaded bullion in late trade after the dollar surged from lifetime lows against the euro.
Gold could fall further if crude oil prices slide and strong investment buying disappears, dealers said.
Spot gold climbed as high as $939.40 an ounce before falling to a low of $922.90. It was at $925.90/926.70 at 2:15 p.m. EDT, against $932.50/933.30 late in New York on Wednesday.
"Market sentiment is positive but the metal needs a period of consolidation," said David Holmes, director of metals sales at Dresdner Kleinwort investment bank.
"The market is already long gold and we are going to find another set of investors to take us on the next leg on the upside," he added.
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The dollar surged from record lows against the euro as traders covered short positions after ECB President Jean-Claude Trichet's unchanged inflation views failed to give the single currency upward momentum.
The Bank of England made its third 25-basis-point cut in five months, bringing its main interest rate to 5 percent. The ECB left rates on hold at 4 percent.
A weaker dollar makes gold cheaper for holders of other currencies and often lifts bullion demand. The metal is also generally seen as a hedge against oil-led inflation.
U.S. crude futures settled down 76 cents at $110.11 a barrel.
Market watchers said investment buying held the key to gold's near-term direction, but the yellow metal was vulnerable to more selling pressure.
"As long as gold continues to feed on investor demand, it will continue to show stability. When that leaves the market place, we could see another pullback," said George Nickas, broker at FC Stone in New York.
"I would not be surprised to see some profit-taking step in as the week concludes, keeping gold in a trading range," he said.
VOLATILE MARKET
Spot gold hit a record high of $1,030.80 an ounce on March 17, then fell to a two-month low of $872.90 last week in a broad commodities sell-off. It has recovered since then.
U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange settled down $5.70 to $931.80 an ounce.
"With such febrile financial markets, and gold ever more reliant on investment demand as physical markets slow, the metal is bound to remain volatile," Fortis Bank said in a report.
"Continuing bad news should support prices, but any signs from April's G7 meeting of a stronger dollar would be a major negative," it added.
In industry news, South African gold output fell 28.2 percent year-on-year in February after a power crisis hit the country's mining sector.
However, India's gold imports in the year to March 2008 fell 23.4 percent from the year before as prices soared, a top industry official said.
Platinum rose to $2,024/2,032 per an ounce from $2,018/2,025 late in New York on Wednesday.
Palladium rose $2.50 to $458.50/462.50 an ounce, but silver fell to $17.96/18.01 an ounce from $18.15/18.20 late in New York on Wednesday.
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