* Oil rises on Ossetia conflict, boosting interest in gold
* Dollar firms to six-month high, capping gains
* Platinum, palladium consolidate after losses
(Recasts, updates throughout, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Aug 11 (Reuters) - Gold climbed in Europe on Monday
as conflict over South Ossetia pushed oil prices higher,
prompting investors to hunt bargains after the metal slid to a
three-month low on Friday.
Gold <XAU=> firmed to $863.20/864.20 an ounce at 0945 GMT
from $855.40/857.00 late in New York on Friday, when it tumbled
to a three-month low of $850.50 as the dollar made its biggest
one-day gain against the euro in 7-1/2 years.
The stronger U.S. dollar, which climbed to a six-month high
against the euro on Monday, is helping to cap gains, but
rebounding oil is giving investors fresh appetite for gold.
"Speculators are bargain hunting here," said Heraeus head of
sales Wolfgang Wrzesniok-Rossbach. "(Oil prices) are up $1.50
and that is certainly a supportive factor."
The fighting in South Ossetia is influencing gold prices via
its impact on the oil market, he said, though he added that as
the conflict is still relatively localised, safe haven buying
remains limited.
Oil rose on Monday, topping $116 a barrel, in a bounce-back
from the previous session's $5 a barrel decline, as traders
worried the conflict between Russia and Georgia over South
Ossetia could disrupt energy exports from the Caspian region.
[]
A firmer crude price tends to benefit gold, which is often
bought as a hedge against oil-led inflation. Stronger oil prices
also boost interest in commodities as an asset class.
"Near term outlook remains cautious and will likely react to
oil price moves and perception of political risk," Fairfax
analyst Marc Elliott said.
"Physical demand from jewellery is likely to remain subdued
this time of year, although should gold weaken further in the
next few weeks, then buying activity could pick up."
The firmer dollar, however, capped gains, as it reduced the
precious metal's appeal as an alternative investment. The dollar
rose to a six-month high against the euro on Monday, before
slipping back a touch. []
DOLLAR PRESSURE
The euro suffered its largest weekly fall since 1999 last
week, pressured by comments from European Central Bank president
Jean-Claude Trichet that suggested a rate hike is not imminent.
While oil is helping gold prices tick up on Monday, a
rebound in the dollar means the precious metals are still
vulnerable to further falls.
"The strength in the U.S. dollar has also been felt hardest
in the precious metals complex, with silver posting the largest
week-on-week price decline in the sector," said Deutsche Bank's
global head of commodity research Michael Lewis in a note.
"We expect further downside, as we position for EURUSD
falling towards 1.45 in response to a deterioration in the
outlook for Euroland economic activity and an adverse shift in
capital flows against the euro area."
Investment in the precious metals remains cautious.
Holdings of the SPDR Gold Trust <GLD>, the largest
gold-backed exchange traded fund, dipped a touch on Friday,
slipping by just over 9,000 ounces to 659.03 tonnes, their
lowest level since July 9.
Bullion holdings of the world's largest silver-backed ETF,
the iShares Silver Trust <SLV.A>, dipped 1 percent on Thursday
to 6.197.33 tonnes.
Spot silver <XAG=> edged up to $15.34/15.50 an ounce from
$15.23/15.31 late in New York. The metal tumbled to a seven-month
low of $15.22 an ounce on Friday.
Among other precious metals, spot platinum <XPT=> rose to
$1,565.00/1,575.00 an ounce from $1,543.00/1,563.00 late in New
York.
Spot palladium <XPD=> rose to $332.00/337.00 an ounce from
$332.00/340.00 an ounce, having fallen to its lowest level in
nearly a year to $324 on Friday.
Both metals are consolidating after posting losses last
week, with platinum down nearly $100 an ounce on Friday from the
end of the previous week, and palladium off 10 percent.
(Reporting by Jan Harvey; Editing by Michael Roddy)
