* Dollar firms vs euro on fears economic gloom will spread
* Oil steadies but South Ossetia conflict lends support
(Recasts, updates throughout)
By Jan Harvey
LONDON, Aug 11 (Reuters) - Gold slipped on Monday, resuming
the downward trend which saw prices fall more than $50 an ounce
last week, as the dollar firmed against the euro, denting the
precious metal's appeal as a currency hedge.
The metal gave up the gains it posted earlier in the session
on the back of rising oil prices, which climbed in response to
fighting in Georgia, as crude steadied in afternoon trade.
Gold <XAU=> edged down to $854.50/855.50 an ounce at 1436
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 focal point of the market today is the dollar
movement," said Lehman Brothers analyst Michael Widmer.
"The dollar had a really good performance in the past week.
That is what is taking some support away from gold prices."
Gold typically moves in the opposite direction to the
dollar, as it is bought as an alternative investment to the U.S.
currency.
The dollar rose against the euro as investors worried over
the impact of a spreading global economic slowdown on other
currencies. []
The other main external driver of gold, oil, steadied in
afternoon trade, but took support from fears conflict between
Russia and Georgia could disrupt supply from the Caspian region.
[]
The fighting in South Ossetia is influencing gold prices via
its impact on oil, analysts say, but little has been seen in the
way of safe-haven buying on the back of the conflict.
"I would classify (this) as a domestic dispute," said one
London-based trader.
Investor interest in gold has been muted by recent price
falls. According to data released by the Commodity Futures
Exchange Commission, liquidation of commitments to buy led to a
drop in net long positions in Comex gold and silver last week.
"Following a third straight week of price declines,
non-commercial traders trimmed their net long positions in gold
and silver by 10.2 percent and 6.6 percent respectively," said
Deutsche Bank in a note.
The volume of gold held by exchange-traded funds also dipped
a touch last week. The world's largest gold-backed ETF, SPDR
Gold Trust <GLD>, said its gold holdings dropped 9,000 ounces on
Friday.
London-based ETF Securities said holdings of its Physical
Gold exchange traded commodity <PHAU.L> fell 1 percent last week
to 1.728 million ounces. Holdings of its Physical Platinum ETC
<PHPT.L> fell 11.5 percent in the same period, it added.
Meanwhile 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 $15.35/15.41 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=> edged down
to $1,535.00/1,555.00 an ounce from $1,543.00/1,563.00 late in
New York.
Spot palladium <XPD=> eased to $330.00/338.00 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 Christopher Johnson)
