Gold steady as inflation fears balance dollar

By Jan Harvey

LONDON (Reuters) - Gold was steady in Europe on Friday as fears over rising inflation balanced the effects of a strengthening dollar and slipping oil prices.

Concerns over rising prices are firmly underpinning the metal, and could take it to its third consecutive weekly gain. The metal ended last Friday at $927.15 an ounce.

Trading was light on Friday with New York closed for the Independence Day holiday, potentially leading to increased volatility in the market.

Gold was little changed at $932.10/933.10 an ounce at 1437 GMT (10:37 a.m. EDT) from $932.70/934.70 late in New York on Thursday.

Traders see the market well supported above $930 an ounce, as inflation fears driven by high oil prices boost the precious metal's appeal as a hedge.

"Indicators are still positive for gold -- high energy prices (and) the ongoing inflation trend are definitely adding support to gold," said Frederic Panizzutti, a trader at MKS Finance.

Gold slipped 1 percent in New York on Thursday as the dollar rallied against the euro, benefiting from a less hawkish than expected outlook on interest rates from the European Central Bank and firmer-than-forecast U.S. payroll data.

A stronger dollar typically pressures gold, which is often bought as an alternative investment to the U.S. currency. A softer greenback makes dollar-priced gold cheaper for holders of other currencies.