(Recasts with quotes, updates prices)
By Karl Plume
LONDON, May 30 (Reuters) - Gold rose more than 1 percent on
Friday after hitting a two-week low on a weaker dollar and as
sharp declines in past sessions attracted bargain hunters.
Other precious metals largely followed suit, with spot
platinum <XPT=> and palladium <XPD=> recovering from three-week
lows and silver <XAG=> bouncing back from a four-week trough.
Spot gold <XAU=> rose as high as $889.60 an ounce and was
quoted at $885.70/886.70 by 1447 GMT, against $877.85/879.25
late in New York on Thursday. It fell about 6 percent this week
to a low of $870 on Friday, its lowest point since May 15.
"We saw a good amount of support at these levels about a
week-and-a-half ago and there was a bounce off of that," said
Merrill Lynch metals strategist Daniel Hynes, referring to a
price level of around $885.
"This has set the floor for this stage and it will be what
gold will rally from, until the momentum is strong enough to
keep it going."
The dollar fell to session lows versus the euro as investors
took profits ahead of the weekend after recent strong gains in
the U.S. currency.
A weaker dollar makes gold cheaper for holders of other
currencies and often lifts bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
Oil climbed back above $127 a barrel on Friday, recovering
from earlier losses triggered by a U.S. regulatory probe.
Physical demand for gold has slowed near the high prices
struck last week and demand may not improve significantly unless
buyers are convinced that prices are poised to climb again,
analysts said.
The third quarter is normally a slow demand period for gold.
"Physical demand has almost dried up in key markets like
India, due to lack of any major festivals in the near term,"
analysts with Vision Commodities Services said in a note.
"High inflation, high energy prices and a general propensity
to purchase household goods in the summer months have turned out
to be additional culprits that force to defer any scheduled gold
buying."
PLATINUM REBOUNDS
Platinum rose after touching a low of $1,946 an ounce, the
lowest level since May 8. It had fallen more than 10 percent
from last week's 2-1/2-month high above $2,200 an ounce despite
a continuing power crisis in top producer South Africa.
The head of state-owned electricity utility Eskom, which
produces about 95 percent of South Africa's electricity, warned
on Thursday that a power shortage that has slowed growth would
go on for years. []
"Platinum is undervalued at these levels as it's been
dragged down by the sell-off across the metals complex as a
whole. It will remain the one to rally quickly once this wave of
selling eases off," said Hynes of Merrill Lynch.
Spot platinum rose to $2,004.50/2,024.50 an ounce from
$1,990.50/2,010.50 in late trade on Thursday. But silver <XAG=>
was down at $16.77/16.83 an ounce, versus $16.86/16.92.
Palladium was flat at $427.50/435.50 an ounce.
(Reporting by Karl Plume; editing by Peter Blackburn)
