Gold climbs as dollar slides versus euro

By Jan Harvey

LONDON (Reuters) - Gold rose more than 2 percent on Friday, recovering from earlier losses, as the dollar slipped sharply versus the euro and oil rallied more than $5 a barrel.

Gold slipped more than 3 percent earlier in the session after the U.S. government said it was considering a plan to deal with toxic banking assets, potentially stabilising the markets.

However, a turnaround in the foreign exchange markets that sent the euro to session highs against the dollar, coupled with a sharp rise in the oil price, helped the metal rally to a day high of $868.65 per ounce.

At 3:04 p.m., spot gold was at $868.55/870.55, against $847.25 an ounce at the nominal New York close on Thursday.

The euro gained ground against the dollar and crude prices rallied as investors digested the implications of a mooted U.S. government plan to deal with toxic bank assets.

Officials say they are considering a taxpayer-funded mop-up of mortgage-related debt.

"The impact of the plan has been for the dollar to weaken, and essentially that has been the catalyst for a move up in all markets," said Calyon analyst Robin Bhar.

"Equities are exploding, base metals are higher and gold as well has taken part."