Gold ends higher on record oil and weak dollar

By Frank Tang and Jan Harvey

NEW YORK/LONDON (Reuters) - Gold ended higher on Monday as the dollar fell in the wake of weaker than expected U.S. manufacturing data and more hawkish comments from the European Central Bank, increasing bullion's appeal as an alternative currency.

Silver prices jumped more than 5 percent, tracking gold, to a session high of $17.40 an ounce.

Gold was last at $883.60/884.80 by New York's last quote at 2:45 p.m EDT (1845 GMT) an ounce, up from $869.00/870.00 an ounce late in New York on Friday. Earlier it spiked to a session high of $894.70, up 3 percent.

The U.S. gold contract for August delivery on COMEX division of the New York Mercantile Exchange settled up $13.20, or 1.5 percent, at $886.30 an ounce.

"This is on the dollar movement," said Commerzbank senior precious metals trader Michael Kempinski. "It looks like we have broken out of the upside channel."

A rally in crude prices to a fresh record high in New York on dollar weakness and as distillate futures strengthened also helped buoy gold, which is often bought as a hedge against oil-led inflation.

However, oil's initial gains fizzled and U.S. crude futures ended down 25 cents at $134.61 a barrel.

Zachary Oxman, senior trader at Wisdom Financial in Newport Beach, California, said that gold could promptly rise above the $900 an ounce level in the near term based on positive fundamental factors related to the currency and energy market movements.