NEW YORK (Reuters) - Gold ended higher on Monday, holding slim gains even as a late-session selloff ate into solid early gains that had pushed bullion to a record high overnight on panic buying amid global financial turmoil.

Gold bars are displayed at the headquarters of Mitsubishi Materials Corporation in Tokyo, January 9, 2008. Gold prices shot up more than 3 percent on Monday to hit fresh record highs as investors stepped up buying of the yellow metal, whose luster has increased due to the dollar's weakness and deepening U.S. financial woes. REUTERS/Toru Hanai

Bullion should find support in the near term as investors flee to safe-haven assets while the dollar plumbs record lows and a recession-wary Federal Reserve cuts interest rates.

Dealers said gold will remain volatile in the near term, with prices in uncharted territory ahead of a rate-setting decision by the U.S. central bank on Tuesday.

Bill O’Neill, managing partner of LOGIC Advisors in Upper Saddle River in New Jersey, said gold rose on panic buying during the Asian and European trading sessions. But gold gave back some gains when global stock markets did not deteriorate further.

“I think some people let go of positions (after) gold ran up on thin volume initially,” O’Neill said.

Spot gold was quoted at $1,001.00/1,001.80 an ounce by New York’s last quote at 2:15 p.m. EDT after falling to a low of $998.90. Earlier, it hit a record high of $1,030.80, against its close of $996.90/997.70 in New York late on Friday.

The U.S. active gold contract for April delivery GCJ8 on the COMEX division of the New York Mercantile Exchange settled up $3.10 at $1,002.60 an ounce.

Other key precious metals finished lower, with platinum declining more than 4 percent to a one-week low and palladium slipping over 6 percent in a broad-based sell off, analysts said.

“It looks as though there is just profit-taking after a great run. There could be selling to meet margin calls as equities tank,” said David Thurtell, analyst at BNP Paribas.

European shares finished 4 percent lower, led lower by banks, while U.S. stocks erased early losses but the broad-based Standard & Poor’s 500 Index was still slightly lower by afternoon trade.

A fire sale of Bear Stearns Cos Inc BSC.N stunned Wall Street and pummeled global financial stocks on Monday on fears that few banks are safe from deepening market turmoil.

Investors often turn to gold as insurance in times of financial market crises and economic uncertainties.

Sinking crude oil prices also weighed on gold, which is used as a hedge against inflation. U.S. crude futures had fallen nearly $7 a barrel in afternoon trade. It settled down $4.53 to $105.68 a barrel in mid-morning trade.

The dollar tumbled to a 12-1/2 year low against the Japanese yen and record lows against the euro and Swiss franc as emergency liquidity-boosting measures by the Federal Reserve over the weekend failed to ease worries about the U.S. financial sector.

MARKET GETS SUPPORT

Some analysts said gold should get support from the financial market concerns and a weaker dollar.

“With the concerns surrounding the other brokerages and banks, it’s going to keep the gold market very steady, and it’s going to keep the demand for hard assets,” O’Neill said. He expected gold futures could retest record highs in the near term

Wall Street now expects the Fed could slash the Fed Funds rate by another 100 basis points to 2 percent at the end of the Federal Reserve Open Market Committee meeting by Tuesday afternoon.

In other metals, silver set a 27-year high at $21.24 before slipping to $19.92. It was last quoted at $20.35/20.41 an ounce, against its Friday’s finish of $20.63/20.68 in New York.

Platinum group metals also tumbled in a broad commodities sell-off on Monday. Speculators kept taking profits after top producer South Africa said last week it would boost electricity to gold mines following a power crisis.

Platinum fell over 4 percent to $1,975 an ounce and was last at $1,980/1,990, against its Friday close of $2,070/2,080. Palladium declined to $465/470 an ounce from $509/514 late on Friday in New York.