NEW YORK (Reuters) - Gold slipped further away from record highs after a choppy session on Thursday, extending the previous session’s steep losses and hit by chart-based weakness and falling energy prices.

The yellow metal could decline further in the near term, largely due to a possible recovery of the dollar, but losses should be limited by flight-to-quality demand amid credit worries and inflation concerns, market watchers said.

“The failure of gold to take out Monday’s high at $914 was seen as a negative by a lot of traders. I just don’t see this market turning around unless there is a news item coming out that takes people by surprise” said Adam Hewison, president of INO.com.

Spot gold XAU= fell as low as $876.90 an ounce, and was last quoted at $876.70/877.40 by New York's close at 2:15 p.m. EST, against $885.60/886.30 late in New York on Wednesday, when it dropped 2 percent. It hit a record high of $914 on Monday.

The most-active gold contract for February delivery at the COMEX division of the New York Mercantile Exchange GCG8 settled down $1.50 at $880.50 an ounce.

“$900 level is going to be a fairly important level for the market just to digest for the moment. I think we have to get more consolidation in the market to push it to the $950, $1,000 levels,” Hewison said.

Weaker crude oil prices dented gold's appeal as a hedge against inflation. U.S. crude futures CLc1 ended 71 cents lower at $90.13 a barrel on Thursday.

“Given the recent volatility, wide intra-day price swings seem set to continue,” said James Moore, precious metals analyst at TheBullionDesk.com.

The dollar slipped versus the euro on Thursday after Fed Chairman Ben Bernanke repeated in a speech to the U.S. Congress’ House Budget Committee that more easing may be necessary.

Bernanke also said he will support efforts to craft a fiscal stimulus package and repeated the U.S. central bank was ready to act aggressively to counter recession risks.

Investors have priced in at least a half-percentage-point cut in the benchmark U.S. rate this month, with some saying the Federal Reserve could cut rates by three-quarters of a point.

The Fed is scheduled to render its interest rate decision at the end of a two-day meeting from January 29 to 30.

CONSOLIDATION SEEN

Zachary Oxman, senior trader with Wisdom Financial in Newport, California, said gold should consolidate in the near term, moving in a trading range between $870 and $900.

“Any big corrections here are going to be met with some long-side accumulation buying,” Oxman said.

In research news, consultancy firm GFMS said on Thursday that the price of gold is expected to correct lower in the near term, but then surge as high as $1,000 an ounce later this year, as a weak U.S. dollar and lingering credit turmoil burnish the metal’s investment appeal. <ID:nN16164903>

Meanwhile, industry-sponsored World Gold Council (WGC) said on Thursday that higher gold prices and increased volatility hurt the consumption of gold jewelry in India, the world’s top gold buyer, in the fourth quarter of 2007.

In 2006, India imported about 715 tons of gold.

London-based ETF securities expected to more than double the money managed in its listed exchange traded commodity funds, including precious metals, to about $7 billion by the end of 2008.

In other bullion markets, 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.

In industry news, Highland Gold Mining Ltd HGM.L plans to raise gold output by at least 10 percent this year and is on track to hit 200,000 ounces of production by 2009, managing director Henry Horne said.

Silver XAG= rose to $15.86/15.91 an ounce, versus $15.84/15.89 late Wednesday, supported by news that BHP Billiton Ltd/Plc BHP.AXBLT.L had stopped operations at its Cannington silver mine in Australia after a fatality earlier in the day.

Platinum XPT= slipped to $1,555/1,560 from $1,559/1,564 an ounce late in New York on Wednesday, while palladium XPD= was down $5 to $366/371 an ounce.