* Gold extends losses on falling oil, hits two-week low
* Platinum drops 3 percent on fears of falling demand
* Palladium drops 5 percent
* Oil down over $7, approaches $100 a barrel
* Dollar hits fresh 2008 highs
(Updates throughout, pvs SINGAPORE)
By David Sheppard
LONDON, Sept 2 (Reuters) - Gold dropped over two percent
towards $800 an ounce on Tuesday, after a steep drop in oil
prices and a rally in the dollar reduced the precious metal's
appeal.
Platinum and palladium also fell heavily, losing three and
five percent respectively due to poor demand and the dollar's
strength.
Gold <XAU=> fell to a low of $800.50 an ounce from
$817.15/818.75 an ounce late in London, before recovering
slightly to $805.00/806.00 an ounce at 1023 GMT.
"The reverse correlation between the dollar's recovery
against the euro and the gold price has been quite impressive
lately," said Standard Chartered analyst Daniel Smith.
"Gold investors are watching the oil price very closely and
with oil coming down, prices have come off."
The dollar extended its rally to fresh 2008 highs against a
basket of currencies on Tuesday , with a near $8 drop in oil
prices fuelling the currency's recovery. []
The current relationship between moves in oil and the
dollar's recovery has weighed doubly on gold, as the precious
metal generally acts as hedge against fuel-led inflation and as
an alternative investment to the U.S. currency.
"The movements in oil prices and the U.S. dollar have both
conspired against gold," said David Moore, an analyst at
Commonwealth Bank of Australia in Sydney.
Gold has lost more than 20 percent in value since spiking to
an all-time high of $1,030.80 in March.
Since July, the dollar has recovered some 15 cents from its
all-time low of $1.60 against the euro, while crude prices are
now about $40 below all-time highs seen above $147 a barrel in
the same month. []
Physical buying has kept gold supported around $800 an
ounce, with rising evidence of demand from Indian jewellers is
returning now prices have come off their highs. []
Gold imports into India -- one of the top consumers of the
metal -- jumped 45 percent in August year-on-year, the first
annual rise seen in 2008. []
Dealers in Delhi said that demand was expected to continue
to rise ahead of the Indian festival season.
PLATINUM AND PALLADIUM PLUMMET
Spot platinum <XPT=> dropped to a low of $1,372 an ounce
from $1,439.00/1,451.00 late in London, before edging back to
$1,380.00/1,400.00 an ounce.
Rising concerns about demand for autocatalysts due to poor
car sales and a slowing U.S. economy have hit prices hard,
dragging them some 40 percent lower from the all-time high of
$2,290 an ounce back in March.
"Japanese sales of automobiles in August were below 200,000
cars, so it's very bad figure. The platinum price is under
pressure. It's a very bearish factor," said Kazuhiko Saito of
Interes Capital Management in Tokyo.
Saito pegged platinum's downside target at $1,350 an ounce -
a level last seen in late August.
Automobile sales in Japan, excluding 660cc mini-vehicles,
tumbled 14.9 percent in August year-on-year to 193,902 vehicles.
Sales for August fell short of 200,000 vehicles for the first
time in 37 years. []
Autocatalysts, used to clean exhaust fumes, account for more
than 50 percent of global platinum demand.
Platinum's sister metal palladium <XPD=> fell over five
percent, touching a low of $282.00 an ounce before recovering to
$288.50/296.50 from $297.00/305.00 an ounce in late London
trades on Monday.
Silver <XAG=> tracked gold lower to $13.20/13.26 an
ounce from $13.40/13.46 an ounce late in London.
(Reporting by David Sheppard; Editing by Peter Blackburn)
