* Stocks rally on U.S. plan to pump $250 billion into banks
* Dollar recovers from lows vs euro
* Oil, other commodities post strong gains
(Adds comment, updates prices)
By Jan Harvey
LONDON, Oct 14 (Reuters) - Gold retreated from highs hit
earlier in the session on Tuesday as equity markets rallied and
the dollar edged off lows against the euro.
Other precious metals remained strong, with platinum
climbing more than six percent and silver four percent to
session highs, supported by a broad-based commodities rally.
Spot gold <XAU=> was quoted at $835.10/838.10 by 1345 GMT,
against $830.80 in late New York trade on Monday. Earlier it
jumped 2 percent to a session high of $853.50 an ounce.
Financial markets surged after news that the United States
could pump $250 billion into U.S. banks in what Federal Reserve
chairman Ben Bernanke called a comprehensive attempt to end the
credit crisis. []
U.S. stocks climbed at the open, tracking earlier gains in
Europe and Asia. []
Mark O'Byrne, director of Gold & Silver Investments in
Dublin, said uncertainty in equities made gold's near-term
direction hard to call, but "traditionally, when you see the Dow
Jones and the FTSE do well, people sell gold".
The dollar added to pressure on bullion as it recovered from
earlier lows against the euro.
"We still believe that the main driver of gold is going to
be the U.S. dollar," said Standard Bank analyst Walter de Wet.
"If sentiment improves and the U.S. dollar appreciates, gold
should move lower."
Firmer crude prices are underpinning gold, however.
Oil surged more than $2 a barrel, extending the previous
session's 4 percent gains, as government moves to rescue banks
fuelled hopes a global recession may be averted. []
Rising crude prices boost interest in gold as a hedge
against oil-led inflation, and enhance the appeal of commodities
as an asset class.
EQUITIES RECOVER
Overall weakness in the dollar, the recovery in equities and
fresh optimism over the economic outlook sparked buying of
commodities in earlier trade, with oil and industrial metals all
trading higher after heavy losses last week.
The Reuters-Jefferies CRB index <.CRB> rose 3 percent to
298.70 on Monday, after scoring its lowest since January 2007
last week.
Demand for gold is firm, with investors buying into coins
and bars and interest in gold-backed exchange-traded funds near
record levels. However, firmer equities may limit gold's rise.
"Even though we see potential for more gains, it is probably
limited while the equity markets remain in such a buoyant mood,
which could be the case for some more days," said Commerzbank
analysts in a note.
Among other precious metals, silver tracked gold higher to
rise 4 percent at its session high of $11.10 an ounce. Silver,
which is primarily viewed as an industrial metal, is also
benefiting from hopes more stable markets could support demand.
Spot silver was at $10.79/10.87 an ounce against $10.66 in
late New York trade on Monday.
Platinum and palladium, which are also largely traded as
industrial metals, climbed, with platinum gaining more than 6
percent to its session high of $1,040 an ounce.
Both metals have posted sharp losses in recent months as
investors worried about the demand outlook for the car industry,
which accounts for around half of total platinum demand. This
could curb further gains, analysts say.
Spot platinum was at $1,019/1,039 an ounce, up from $978.50
in late New York trade on Monday, while palladium was at
$198.50/206.50 an ounce against $196.50.
(Reporting by Jan Harvey; editing by Michael Roddy)
