LONDON (Reuters) - Gold consolidated on Wednesday after hitting record highs earlier in the session, supported by persistent weakness in the dollar and strength in oil prices, which rose to a 2009 high above $75 a barrel.
Analysts are concerned that the metal may have become overbought after prices rallied more than 6 percent in the last month, peaking at $1,070.40 an ounce on Wednesday.
Spot gold was bid at $1,059.85 an ounce by 1454 GMT (10:54 a.m. EDT), against $1,063.35 late in New York on Tuesday.
"We basically have a situation here where all the precious metals -- gold, silver, platinum and palladium -- are in overbought territory, which is a little bit worrying in the near term," said Ole Hansen, senior manager at Saxo Bank.
"In order for this move to continue, we need to test (its) strength," he added. "But as long as (traders) keep selling the dollar, there is no reason not to continue buying gold."
The dollar index .DXY, which tracks the currency's performance against a basket of six others, hit its lowest since August 2008 as traders bet on U.S. interest rates staying low, with rising commodities denting its safe-haven appeal.
Meanwhile oil prices extended gains on Wednesday to set a new 2009 high of $75.40 a barrel, boosted by a weak dollar and optimism over a global economic rebound.
The Reuters-Jeffries CRB index .CRB, seen as a global commodities benchmark, rose to an eleven-month high on Wednesday as oil, base and precious metals prices rallied.
On the wider markets, U.S. stocks jumped and European shares hit a one-year high as risk appetite was improved by reassuring earnings from Intel (INTC.O: Quote, Profile, Research, Stock Buzz) and JPMorgan (JPM.N: Quote, Profile, Research, Stock Buzz).
OVERBOUGHT TERRITORY
But demand for physical gold is still lackluster in key markets as prices hold near record levels. In India, the world's biggest bullion consumer last year, demand was slack despite the onset of the festival period as prices rose.
Among other precious metals, platinum, silver and rhodium also hit their highest levels in more than a year on Wednesday. Platinum touched a 13-month peak of $1,362.50 an ounce in Asian trade, and was later bid at $1,355.50 against $1,358.50 an ounce late in New York on Tuesday.
Silver hit a 14-month high of $18.07 an ounce, and was later at $17.81 versus $17.75. The world's main primary silver producer Fresnillo (FRES.L: Quote, Profile, Research, Stock Buzz) said it sees silver near $17-18 an ounce for the rest of 2009.
Autocatalyst material rhodium rose $25 an ounce to a year-high of $1,725, while palladium was at $325 versus $325.50. It hit a 14-month high of $333 on Tuesday.
However, the precious metals may be poised for a correction after rising sharply in recent days.
The 14-day relative strength indicator for gold, which measures the magnitude of price movements, rose as high as 91 early on Wednesday, while that of platinum touched 78 and silver 89. A reading above 70 suggests overbought territory.
"(Gold) has moved very quickly, and although we see further U.S. dollar weakness by the end of the year, I think a lot of the flows into gold have probably already happened in anticipation of that," Standard Chartered's head of commodities research Helen Henton told Reuters Television.
"There is good support at about $1,030 an ounce but clear resistance at $1,100, so we think although prices are going to stay in the thousands, they will probably pull back from the levels seen today," she added.
