Gold edges higher on strong oil, awaits U.S. data

By Atul Prakash

LONDON (Reuters) - Gold ticked higher on Thursday helped by strong oil prices, but a firmer dollar capped gains and prompted investors to trade cautiously ahead of key U.S. economic data.

Gold was quoted at $871.65/872.35 an ounce at 6:22 a.m. EDT (1022 GMT), against $870.85/872.05 late in New York on Wednesday and last week's four-month low at $845 an ounce.

"It's hard to see a clear trend at the moment on gold. Probably we are going to bounce around in the near term," said Michael Widmer, metals analyst at Lehman Brothers.

Widmer said that if one looks at the macro-economic environment in the United States, there could still be a case for people to buy more gold.

But on the other hand, the dollar was slightly stronger on expectations that the U.S. Federal Reserve might not lower interest rates further, he added.

A firmer dollar makes gold costlier for holders of other currencies and often lowers bullion demand. The metal is also generally seen as a hedge against oil-led inflation.

The dollar hit a two-month high against a basket of major currencies after a Financial Times report said the United States and Europe now have a united desire to see the dollar strengthen against the euro, citing officials.

Investors awaited a meeting of the European Central Bank later on Thursday. Even though interest rates are expected to be left on hold at 4 percent, markets will be scrutinizing every word from ECB president Jean-Claude Trichet's news briefing at 8:30 a.m. EDT (1230 GMT).