UPDATE 4-Gold hits two-week low as dollar rises

(Recasts with quotes, prices, changes dateline, pvs SINGAPORE)

By Karl Plume

LONDON, May 30 (Reuters) - Gold hit a two-week low on Friday as the dollar firmed and as lower oil prices hurt the metal's appeal as hedge against inflation.

Other precious metals also remained under pressure, with spot platinum XPT= and palladium XPD= both setting three-week lows and silver XAG= nearing a four-week trough.

Spot gold XAU= stood at $878.65/879.65 an ounce by 1004 GMT, against $877.85/879.25 late in New York on Thursday. It earlier hit $870 an ounce, its lowest point since May 15.

The metal has fallen more than 6 percent this week.

"Gold is just treading water after yesterday's huge decline," said Matthew Turner, commodities analyst with Virtual Metals.

"It had a bad run over the past two days mainly on the oil price. Secondly, gold failed last week to get up to its 2008 highs and some people may be disillusioned, wondering if it has made its highs for the year already."

The euro hit a two-week low against the dollar after surprisingly weak German retail sales figures added to the view that the euro zone economy may be weakening.