* Dollar weakens to two-month low versus euro
* Oil climbs nearly 7 percent; OPEC supply cut expected
(Updates prices, adds comment)
By Jan Harvey
LONDON, Dec 15 (Reuters) - Gold rose more than 2 percent in
Europe on Monday as the dollar slipped to a fresh two-month low
versus the euro, boosting interest in the precious metal as a
currency hedge.
Gold was held below $830 an ounce for much of the day by
technical resistance, but stops were triggered as the rising
euro pushed prices higher, leading to a spike to a two-month
high of $842.15 an ounce.
Spot gold <XAU=> was quoted at $840.05/842.05 an ounce at
1533 GMT, against $819.90 an ounce in New York late on Friday.
Traders are awaiting an announcement on interest rates from
the U.S. Federal Reserve on Tuesday, which will have a
significant impact on the foreign exchange market, and
consequently on gold.
"On the currency side, the high yield has been dragging euro
higher," said Pradeep Unni, a senior analyst at Richcomm Global
Services.
"If the Fed slashes rates again, the yield differentials
between the euro zone and Fed would widen further."
The dollar slipped against both the yen and the euro,
striking a two-month low against the single currency as traders
continued to exit long dollar positions, spooked by uncertainty
over the fate of U.S. automakers. []
Gold tends to track the euro/dollar exchange rate closely,
as it is often bought as an alternative investment to the U.S.
currency and tends to move in the opposite direction to it.
The Federal Reserve is widely seen cutting rates by at least
50 basis points on Tuesday after the Federal Open Market
Committee's two-day policy meeting concludes.
"Everyone is banking on a lower interest rate in the U.S.,"
said Afshin Nabavi, head of trading at MKS Finance in Geneva.
"If the dollar continues to lose value, of course it will
benefit gold."
Oil, the other key external driver of gold, rose nearly 7
percent to $50 a barrel in afternoon trade. Crude prices have
been boosted by expectations for a cut in OPEC production later
this week. []
EQUITIES SLIP
However, equity markets have shed gains, with European
shares turning negative in the early afternoon after a lower
opening on Wall Street. []
U.S. stocks retreated as shares of big-cap tech companies
declined while uncertainty over the fate of a possible rescue
plan for ailing carmakers also weighed. []
Among other precious metals, spot silver <XAG=> tracked gold
higher to $10.51/10.59 an ounce, against $10.23 in New York late
on Friday.
The platinum group metals benefited from hopes for a
bail-out of the U.S. automotive industry. Carmakers are major
buyers of PGMs and weakness in the sector has pushed prices
sharply lower in recent months.
Major platinum producer Aquarius Platinum <AQP.L> said on
Monday it will keep its Everest mine in South Africa closed for
at least six months. []
"A six-month closure would result in 38,000 ounces of lost
platinum output and 19,000 ounces of lost palladium output, less
than 1 percent of global production of both metals," said
Barclays Capital.
"However, for now the market focus remains firmly centred on
demand weakness, which is likely to expose prices to downside
risk," it added.
Spot platinum <XPT=> climbed to $833.50/853.50 an ounce from
$805.50 an ounce, while palladium <XPD=> surged to a high of
$178, before easing to $173.50/181.50 an ounce, up from $168
late on Friday.
(Editing by Peter Blackburn)
