* Oil climbs $2 a barrel on fears storm will hit U.S. output
* Dollar slips as traders take profits after six-month high
(Updates prices, adds comment)
By Jan Harvey
LONDON, Aug 27 (Reuters) - Gold climbed in Europe on
Wednesday as oil prices rose, boosting the precious metal's
appeal as an inflation hedge, and as the dollar retreated from a
six-month high hit this week.
Oil firmed more than $2 a barrel as fears grew that tropical
storm Gustav could hit U.S. oil installations in the Gulf of
Mexico. []
Gold <XAU=> rose to $831.00/832.00 an ounce at 1340 GMT from
$822.90/824.30 an ounce late in New York on Tuesday.
"Gold is mainly supported by a firm crude price," said
Philip Carlsson, Saxo Bank's global products manager for futures
and options.
"I don't see the market as all bullish though, and should
the tropical storm create fewer problems than expected, the
sell-off could be immediate," he added.
The dollar also slipped against the euro on Wednesday,
giving up more of the gains that took it to a six-month high
against the single currency on Tuesday, as investors cashed in
profits. []
A weaker dollar typically benefits gold, which is often
bought as a hedge against weakness in the U.S. currency.
In the longer term, global economic deterioration is
expected to support the dollar, as the Federal Reserve is likely
to hold rates while other key central banks are expected to cut.
This should keep a lid on gains in gold, analysts said.
Traders awaited the release of U.S. weekly oil inventory data
at 1435 GMT, which could impact crude prices. A Reuters poll of
analysts forecast a 1 million barrel rise in crude stocks.
Resurgent physical demand for gold coins and bars, which was
a key factor supporting gold prices over $800 an ounce, is still
supportive, traders say.
Jewellery demand is also expected to pick up going into
September, especially in India, the world's biggest jewellery
market.
"Reports state that physical demand out of India is picking
up ahead of the approaching festival season that peaks in
October for Diwali," noted Marc Elliott, an analyst at Fairfax.
PLATINUM CLIMBS
Spot platinum meanwhile climbed 1.5 percent as traders took
advantage of a recent drop in prices to buy into the white
metal. Palladium also ticked up 2 percent.
Both metals have suffered from fears weaker economic growth
will cut car consumption, denting demand for the platinum group
metals as components in catalytic converters.
But after a sharp drop in prices throughout early August,
both metals are now bouncing back.
Spot platinum <XPT=> rose to $1,432.00/1,452.00 an ounce from
$1,409.50/1,429.50 late in New York. Spot palladium <XPD=>
firmed to $291.50/299.50 an ounce from $282.00/290.00.
"We believe that palladium is chronically cheap relative to
platinum," said JP Morgan analyst Michael Jansen in a note.
"We actually believe that palladium should be bought on an
outright basis in the $250-$275/oz area," he added.
Silver <XAG=> was steady at $13.55/13.61 an ounce from
$13.56/13.64 an ounce late in New York.
(Reporting by Jan Harvey; editing by Christopher Johnson)
