UPDATE 4-Gold recoils from record highs; dollar fights back

(Adds closing in Tokyo)

By Lewa Pardomuan

SINGAPORE, Jan 17 (Reuters) - Gold extended losses from a
record high on Thursday, surrendering as much as $8.60 an ounce
as the dollar held onto its gains against the euro ahead of a
testimony by U.S. Federal Reserve Chairman Ben Bernanke.

But a firmer oil CLc1 offered support and gold's price
drop stirred up trading in the physical sector, with dealers
noting purchases from jewellers in Indonesia, Thailand, Vietnam
and India, the world's largest gold consumer.

Spot gold XAU= fell to $880.30/881.00 an ounce from
$885.60/886.30 late in New York on Wednesday, when it dropped
more than 1 percent as funds liquidated positions to cover
margin calls from losses in stock markets.

"That's really a reflection of possibly people's
expectations of some weakness in the economy to come as a
result of the U.S. On top of that, some profit taking is taking
some buyers off the table to pay for margin calls," said Darren
Heathcote of Investec Australia in Sydney.

"I think there'll be a little bit of recession, downward
pressure on it. Maybe there won't be so much jewellery demand,
but I think on the whole, the recent move has been reinfluenced
significantly by the need to cover margin calls."

Gold hit a record high at $914 an ounce on Monday on
expectations of a sharp cut in U.S. interest rates and turmoil
in the financial markets triggered by a mortgage-related
crisis.

Tokyo shares .N225 ended 2.1 percent higher, bouncing
back from two-year lows as a firmer dollar helped ease
exporters' fears about a potential recession in the United
States, the region's top overseas market. [ID:nHKG166665]

"I believe there is a very good chance that we'll see gold
recover, providing the stock market, particularly the U.S.
stock market, stabilises," said Heathcote of Investec.

He pegged support at $875 and $877, with resistance at
$900.

The euro fell to $1.4607 EUR=, holding near a two-week
low of $1.4594 hit on electronic trading platform EBS on
Wednesday, after comments from a European Central Bank official
fuelled fears that U.S. economic weakness may be spreading to
Europe. [ID:nT9076]

Investors will scrutinise Fed Chairman Bernanke's words
later in the day for clues on how much the U.S. central bank is
poised to cut interest rates later this month.

Many dealers have priced in expectations for at least a
half-percentage-point interest rate cut by the Fed at its next
regular policy meeting on Jan. 29-30 to stimulate the sagging
economy.

"The small specs are still a bit on a short side. Just a
bit. They might be selling at the lower range right now," said
William Kwan at Phillip Futures in Singapore.

"It's a healthy correction. It makes gold cheaper for
investors to purchase," he said.

PHYSICAL BUYING

The key gold futures contract for December 2008 delivery
<0#JAU:> on the Tokyo Commodity Exchange (TOCOM) ended 26 yen
per gram higher at 3,074 yen in a technical rebound after
falling by the daily 120 yen limit on Wednesday.

"There's physical buying this morning and India also
re-emerged. Physical buyers came back to the market before
TOCOM opened but premiums are still the same," said a dealer in
Singapore.

Gold bars were on par with the spot London prices in
Singapore, unchanged from last week <GOLD/ASIA1>.

COMEX gold futures rebounded, with the most active February
contract GCG8 rising $1.5 an ounce to $883.5 an ounce.

Goldman Sachs raised its 2008 gold price forecast to $915
per ounce from $800, factoring in an expected U.S. recession in
the second and third quarters that would lead to a weaker
dollar. [ID:nWNA4695]

Platinum XPT= fell to $1,558/1,563 an ounce from
$1,559/1,564 an ounce late in New York.

Silver XAG= edged down to $15.80/15.85 an ounce from
$15.84/15.89 an ounce. Palladium XPD= was slightly lower at
$370.50/375.50 an ounce from $371/375.
Precious metals prices at 0838 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 880.50 3.30 +0.38 5.74
Spot Silver 15.79 0.01 +0.06 6.91
Spot Platinum 1558.00 -1.00 -0.06 2.50
Spot Palladium 370.50 -0.50 -0.13 0.68
TOCOM Gold 3074.00 26.00 +0.85 0.46
117814
TOCOM Platinum 5287.00 36.00 +0.69 -0.97
43891
TOCOM Silver 548.90 -0.90 -0.16 1.46
1588
TOCOM Palladium 1302.00 0.00 +0.00 -3.63
1397
Euro/Dollar 1.4604
Dollar/Yen 107.70
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Editing by Ben Tan)