* Oil rises nearly 10 percent on Middle East violence
* Dollar slips vs euro on grim outlook for U.S. economy
(Recasts, adds detail, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Dec 29 (Reuters) - Gold rose nearly 3 percent on
Monday as tensions in the Middle East sparked a rally in oil
prices and boosted interest in the precious metal as a haven
from risk, while the dollar weakened sharply against the euro.
Spot gold <XAU=> reached a session high of $889.55 an ounce,
its strongest level since Oct 10, before easing to
$883.70/885.70 at 1014 GMT from $866.80 in New York late on
Friday.
"Over the weekend, the news out of the Middle East has not
been very good and overnight we saw a lot of buying of gold, and
of everything -- oil is up, platinum group metals are up,"
Afshin Nabavi, head of trading at MKS Finance, said.
"The situation in the Middle East seems very jittery, and we
will probably see some dip buying once the market comes down."
Israeli aircraft attacked Hamas targets in the Gaza strip
for a third day on Monday and militants launched a fatal rocket
attack on Israel in defiance of an offensive that has killed
more than 300 Palestinians. []
Geopolitical tensions increases interest in bullion as a
safe haven investment, and are also a prime factor driving oil
prices, which also influences gold, higher.
Oil rose nearly 10 percent to above $41 a barrel as the
violence served as a reminder that political tensions could
threaten Middle East crude supplies. []
"Further geopolitical tension should inflate the risk
premium in current precious metal prices, which should translate
into increased upside potential in the near term -- barring any
significant decline in financial market systemic risk," Standard
Bank analyst Manqoba Madinane said.
The dollar weakened against the euro, helping to lift gold.
A softer dollar typically supports gold, which is often bought
as an alternative investment to the U.S. currency.
The dollar fell broadly on Monday as a grim outlook for the
U.S. economy weighed. []
SILVER GAINS
Among other precious metals, silver <XAG=> tracked gold
higher to $10.90/10.98 an ounce from $10.64 an ounce late on
Friday. Earlier it touched a one-week high of $11.01 an ounce.
Investment demand for silver-backed exchange-traded funds
remains strong.
The world's largest silver-backed ETF, the iShares Silver
Trust <SLV.A>, said its bullion holdings rose more than 30
tonnes or 0.5 percent on Dec 26 to their highest since late
October. []
The New York-based trust has recorded an inflow of more than
106 tonnes of silver since the beginning of December.
Platinum group metals also climbed, with platinum touching a
session high of $931 an ounce, its strongest in 10 weeks. Later
it was quoted at $919.50/924.50 an ounce against $888.50.
"The white metal should benefit from further bargain hunter
interest in the coming sessions, with chart resistance pegged at
$938/44/74," James Moore, an analyst at TheBullionDesk.com,
said.
"However the metal still remains overshadowed by slowing
auto demand and shifting market fundamentals," he added.
Fears over falling demand from the car industry, which
accounts for around half of global platinum consumption, has
knocked platinum down by as much as two-thirds from the all-time
high of $2,290 an ounce it reached in March.
Spot palladium <XPD=> was quoted at $181/186 an ounce, up
nearly 5 percent from $174.50 in New York late on Friday.
(Reporting by Jan Harvey; Editing by Sue Thomas)
