August 8, 2008 / 9:13 AM / 11 years ago

UPDATE 5-Gold falls 1 pct on firm dollar, commodity sell-off

* Gold slides 1 pct as dollar hits 5-month high vs euro

* Commodity weakness spurs selling of gold

* Platinum steadies, consolidating below $1,600

(Recasts, updates throughout, changes dateline, pvs SINGAPORE)

By Jan Harvey

LONDON, Aug 8 (Reuters) - Gold slipped 1 percent in Europe on Friday as the dollar firmed to a five-month high against the euro, denting the precious metal’s appeal as a currency hedge, and as oil prices fell.

Gold XAU= was at $863.25/864.25 an ounce at xx GMT, down from $871.05/872.45 late in New York. Earlier the metal hit a session low of $862.00 an ounce, an eight-week trough.

The dollar also surged against the pound, while the dollar index struck a five-month high as the economic global slowdown dented confidence in other currencies. [ID:nL8517510]

Commerzbank trader Rory McVeigh said the precious metal’s decline was down to “dollar strength today, (with) dwindling commodity prices as a back drop”.

Commodities are posting losses almost across the board, with copper, coffee, sugar and oil all declining.

Oil slipped more than $1 a barrel as supply fears eased, and as the firmer dollar prompted funds to exit commodities. [ID:nSP93453]

Weaker crude tends to pressure gold, as the precious metal is often bought as a hedge against oil-led inflation.

Barclays Capital said in a note on Friday: “The summer doldrums have well and truly hit the commodity markets.”

“Sentiment has turned extremely negative and prices have fallen across a broad range of different markets, irrespective of differing fundamental dynamics and outlooks.”

Investors are shifting away from commodity indices into commodity-linked exchange traded products, with about $10 billion invested in ETPs over the first half of 2008, compared to less than $4 billion in the same period of 2006 and 2007.

Silver bullion held by the iShares Silver Trust (SLV.A), the world’s largest silver-backed exchange-traded fund, fell 1 percent to 6,197.33 tonnes on August 7, the trust said.

* Gold hits lowest in 8 weeks on rising dollar

* Platinum sheds early gains (Updates prices, adds quotes, activity in physical market)

By Lewa Pardomuan

SINGAPORE, Aug 8 (Reuters) - Gold tumbled to an eight-week trough in volatile trade on Friday, losing some of its shine as an alternative investment after the dollar jumped against the euro, prompting some investors to switch funds back into currencies.

But lower prices spurred buying from jewellers in India, the world’s main consumer, and other countries in Asia. Platinum failed to sustain gains as fears of supply curbs following a one-day strike in main producer South Africa subsided.

Silver tumbled to its weakest since late January, tracking gold.

“It’s very bearish. Oil prices are dropping, the dollar is up and platinum is very bad. People are scared about the volatile market,” said Ronald Leung, director of Gold Dealers in Hong Kong.

Gold has dropped more than 15 percent in value since spiking to a record high of $1,030.80 hit in March.

The euro extended losses against a broadly stronger dollar to fall more than 1 percent as concerns about the region’s growth outlook weighed on the European currency. [USD/]

In Singapore, physical dealers reported buying interest from India ahead of Hindu festivals which culminate with Diwali in October, pushing up premiums for gold bars to 75 U.S cents to the spot London price from 60 cents last week. <GOLD/ASIA1>.

“In the absence of commodity-type news, I think the market is probably going to be weaker. I think it’s mainly dollar-dominated today,” said Mark Pervan, an ANZ senior commodity analyst.

“I think around $850 would be a critical level,” said Pervan, who pegged resistance at $900.

Spot platinum XPT= fell to $1,565.00/1,577.00 an ounce from $1,572.00/1,592.00 late in New York, having hit a high of $1,578.50 an ounce.

“As for platinum, $1,550 may be the next target. If you compare with Johnson Matthey’s forecast, this is incredibly cheap,” said Yukuji Sonoda, precious metals analyst at Daiichi Commodities.

Platinum prices have taken a dramatic turn since spiking to a record high at $2,290 an ounce in early March, losing much of their gains to profit taking and a slowing U.S. economy that threatens to slash demand for autocatalysts.

The current price was well below the target of $2,500 forecast in May by Johnson Matthey (JMAT.L), the world’s largest platinum refiner and distributor, citing output shortfalls and strong demand.

The bulk of the world’s platinum is used by automakers in autocatalyst systems that scrub exhaust fumes of dangerous and environmentally damaging chemicals.

The most active Tokyo platinum contract for June 2009 delivery <0#JPL:> on the Tokyo Comodity Exchange fell 49 yen per gram to 5,506 yen.

New York gold futures GCZ8 fell $6.3 to $871.60 an ounce.

Spot palladium XPD= dropped to $342.00/350.00 an ounce from $344.00/352.00 late in New York. Silver XAG= fell to $15.85/15.90 an ounce from $16.14/16.23.

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