Gold hits one-week low on dollar; physical buyers emerge

By Lewa Pardomuan

LONDON (Reuters) - Gold fell to its lowest in a week in Europe on Wednesday as the U.S. dollar held gains against other currencies, but jewelers and other physical buyers resurfaced in Asia and the Middle East.

Spot gold hit a low of $859.30 an ounce, its lowest level since May 5, before bouncing to $862.85/863.85 an ounce, still down from $866.55/867.95 late in New York on Tuesday.

In other precious metals, platinum briefly dipped below $2,000 an ounce before rebounding on bargain hunting.

"The physical activity is quite good. It's not as good as it was a couple of weeks ago, but it's still reasonable," said Frederic Panizzutti, metals analyst at MKS Finance, referring to physical demand in Asia and the Middle East. = "We see, generally speaking, only little buying interest from Europe for either physical or non-physical. We expect the market to get back to gold and push it higher but you need to consolidate somewhere between $850 and $950."

Gold has lost more than 16 percent in value since spiking to a lifetime high of $1,030.80 an ounce on March 17, mostly driven by profit-taking and the dollar's recovery.

The dollar firmed on Wednesday, building on gains made after robust U.S. retail data, with attention turning to inflation figures that could heighten chances of a pause in the Federal Reserve's rate cut campaign.

In the physical market in Asia, dealers noted buying from Indonesia and Vietnam but demand from India, the world's largest consumer, slowed down after the end of the busy festival season.

Premiums for gold bars were steady at 80 U.S. cents an ounce against the spot London prices in Singapore.