* Dollar hits two-year high vs euro
* Oil slides more than $2 a barrel on demand fears
* Platinum slips 3 pct as firmer dollar adds to demand fears
(Recasts, adds comment, changes dateline, pvs SYDNEY)
By Jan Harvey
LONDON, Oct 27 (Reuters) - Gold slipped more than 3 percent
in Europe on Monday as the surging dollar dented the precious
metal's appeal as an inflation hedge, and as weakness on the
equity markets prompted selling of gold to meet margin calls.
Other precious metals such as silver and platinum were
caught up in the sell-off, with platinum sliding nearly 6
percent as traders worried over the demand outlook for the metal
used in catalytic converters.
Spot gold <XAU=> was at $715.70/718.20 an ounce at 1013 GMT,
down from $733.30 an ounce in New York late on Friday. Earlier
it touched a session low of $706.10.
"The dollar is part of the fall, and another component is
fund selling," Standard Bank analyst Manqoba Madinane said.
"There is just a general fear in the market. No-one knows where
the floor is."
"The ongoing selling (of equities) will affect gold on the
basis that funds need to get money out of the market," he added.
"That will be negative for gold."
The market slipped as the stronger dollar dented gold's
appeal as an alternative investment to the currency. The dollar
hit a two-year high against the euro as risk-averse investors
piled into the U.S. currency and the yen.
European shares hit 5-1/2 year lows, echoing a slide in Asia
prompted by a surging yen, as investors feared a flurry of
Central Bank action would fail to ward off a global recession.
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Shares on the FTSEurorfirst 300 index slipped 5 percent in
early trade, while emerging market equities fell to their lowest
since September 2004. Gold is under pressure as funds liquidate
their bullion holdings to cover losses on other markets.
"Financial deleveraging is overwhelming any safe haven
buying (of gold)," said Calyon metals analayst Robin Bhar.
OIL FALLS
Sliding oil prices are adding to pressure on gold. The
precious metal typically moves in line with crude, both because
it can be bought as a hedge against oil-led inflation, and
because falling oil prices often dent interest in commodities as
an asset class.
"As long as crude oil remains in a downward trend, it is a
burden for gold," investment bank Dresdner Kleinwort said in a
research note.
Good demand for gold jewellery was seen over the weekend in
India, the world's largest gold market, due to the Dhanteras
festival on Sunday. However, sales are expected to slow after
Diwali on Tuesday, traders said. []
Among other precious metals, platinum tumbled almost 7
percent to a session low of $732.50 as the firmer dollar added
to fears over weakening demand from carmakers, who account for
around half of global platinum consumption.
Spot platinum <XPT=> later recovered to trade at
$743.50/773.50 an ounce against $788.50 in New York late on
Friday. Its sister metal palladium <XPD=> edged down to
$163.50/173.50 an ounce from $167.
Silver tumbled in line with gold, shedding more than 6
percent to its session low of $8.70 an ounce, before recovering
to trade at $8.81/8.91 against $9.30 an ounce.
Holdings of the world's largest silver-backed
exchange-traded fund, the iShares Silver Trust, edged down 1
percent on Friday, the trust said. []
(Additional reporting by Julie Crust)
