* Oil up over $2/bbl on storm fears, U.S. inventory drop
* Dollar slips as traders take profits after six-month high
(Recasts, adds analyst comments, closing prices, adds NEW YORK
to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Aug 27 (Reuters) - Gold ended higher 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 against the euro.
Oil firmed more than $2 a barrel after data showed U.S.
crude inventory fell and as fears grew that tropical storm
Gustav could hit oil installations in the Gulf of Mexico. []
Gold <XAU=> was at $826.05/827.45 by New York's last quote
at 2:15 p.m. EDT (1815 GMT), up 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.
Jon Nadler, senior analyst at Kitco Bullion Dealers in
Montreal, said that gold buying remained sluggish, and
short-term trades could dominate the market until after the U.S.
Labor Day holiday next week.
U.S. gold contract for December delivery <GCZ8> settled up
$5.90 at $834.00 an ounce on the COMEX division of the New York
Mercantile Exchange.
The dollar slipped as investors bet the U.S. currency's
recent jump to 2008 highs against a basket of currencies was too
far, too fast given hawkish rhetoric from a European Central
Bank policy-maker. []
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.
Resurgent physical demand for gold coins and bars, which was
a key factor supporting gold prices above $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=> ended higher at $1,434.50/1,454.50 an
ounce, up from $1,409.50/1,429.50 late in New York. Spot
palladium <XPD=> firmed to $288.50/296.50 an ounce, higher than
its previous U.S. finish of $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=> finished lower at $13.47/13.53 an ounce,
ignoring gold's strength as traders locked in profits, compared
with $13.56/13.64 an ounce late in New York late on Monday.
(Editing by Matthew Lewis)
