* Dollar weak but soft demand for gold limits gains
* Platinum, palladium hit multi-month highs on supply threat
(Updates prices, quotes)
By Jan Harvey and Catherine Bosley
LONDON, Aug 5 (Reuters) - Gold held near $965 an ounce on
Wednesday, supported by a weaker dollar, while gains were
limited by a lack of underlying demand for the metal from
jewellers and exchange-traded funds.
Platinum and palladium built on the previous session's rise,
with the threat of supply disruption in major producer South
Africa taking the metals to multi-month highs.
Spot gold <XAU=> was bid at $964.20 an ounce at 1243 GMT,
against $966.75 an ounce late in New York on Tuesday. That
session it hit a high of $970.05, its strongest since June 5.
"The major forces that are affecting gold are the dollar on
the one hand and ETF flows on the other," said Deutsche Bank
commodities analyst Michael Lewis.
He said the dollar was at risk of falling still further,
depressed by low interest rates coupled with a large fiscal
deficit. "The exchange rate and interest rate environments still
look quite supportive for gold."
He added that the dollar would have to weaken to $1.60 or
$1.70 against the euro for gold to push past $1,000 an ounce.
The dollar is now near $1.44 against the euro. []
Weakness in the U.S. currency encourages more investors to
move into hard assets such as gold, and makes dollar-priced
commodities cheaper for holders of other currencies.
The dollar is holding near its lowest level this year,
though it reduced its losses versus the euro after data showed
U.S. employers cut more jobs than expected in July.
European shares also pared gains and U.S. stock futures
turned negative after the ADP jobs report, which is seen as an
important precursor to non-farm payrolls data due at the end of
the week. [] []
On the demand side, gold buying by ETFs, which issue
securities backed by physical stocks of metal, remains weak. New
York's SPDR Gold Trust <GLD>, the largest gold ETF, said its
holdings were steady for a fourth day on Tuesday. []
Meanwhile in India, the world's biggest gold consumer last
year, bullion buying was hurt by rising prices. []
PLATINUM RALLIES
Gold's rise helped lift silver <XAG=> to $14.78 an ounce, a
seven-week high, from $14.61 on Tuesday. It was later at $14.72.
Platinum and palladium rose on news unions are planning a
strike at South African power utility Eskom, having already been
lifted earlier in the week by positive July car sales data.
The National Union of Mineworkers, South Africa's biggest
union, said it plans to strike at Eskom [] next week
after rejecting a wage offer, raising the threat of power
disruptions that could disrupt metals production. []
"Although there is still uncertainty whether the strike
action will go ahead, the newswire reports triggered buying
activity in the (platinum) market," Standard Bank said in a
note.
The bank said it sees a major strike by Eskom as "unlikely".
"Under South African labour law, Eskom is classified as an
essential service and therefore most of its staff cannot go on
strike," it said.
"Given the importance of stable electricity supply to the
country's economy, we believe the possibility of government
intervention in wage negotiations between Eskom and unions are
also relatively high."
Spot platinum <XPT=> hit a high of $1,290 an ounce on
Wednesday, its firmest since June 6, and was later at $1,281 an
ounce against $1,265.50. Palladium <XPD=> rose to a new 11-month
high of $281, and was at $276.50 against $274.50.
(Editing by Anthony Barker)
