* Bullion hits highest since Apr 2 as dollar dips, oil jumps
* Dollar slides to 4-mth trough versus basket of currencies
(Updates throughout, changes dateline - pvs TOKYO)
By Jan Harvey
LONDON, May 13 (Reuters) - Gold rose to a five-week high in
Europe on Wednesday as the dollar slid to its lowest in four
months against a basket of currencies, denting the precious
metal's appeal as an alternative asset.
Rising oil prices, which are currently holding just under
Tuesday's six-month high just above $60 a barrel, are also
boosting interest in gold as a hedge against inflation, analysts
said.
Spot gold <XAU=> touched a peak of $928.30 an ounce, its
firmest since April 2, and was bid at $926.70 an ounce at 0854
GMT, against $921.85 an ounce late in New York on Tuesday.
U.S. gold futures for June delivery <GCM9> on the COMEX
division of the New York Mercantile Exchange rose $3.70 to
$927.60 an ounce.
"The dollar does seem to be the driver here, that and oil
rising above $60 a barrel," said Robin Bhar, an analyst at
investment bank Calyon.
He said the weaker dollar was prompting buying of gold as a
hedge against rising inflation. "Higher energy prices will feed
into those fears as well," he added.
The dollar slipped to a four-month low against a basket of
currencies and a seven-week trough versus the euro as a recovery
in risk appetite curbed safe-haven buying. []
Like all dollar-priced commodities, gold becomes cheaper for
holders of other currencies as the U.S. unit weakens.
Its relationship with the dollar is particularly strong,
however, as it is also often bought as an alternative asset to
the currency and a hedge against rising prices.
Underlying demand for gold remains relatively lacklustre.
Holdings of gold exchange-traded funds are stable, while dealers
say bullion buying in India, the world's biggest gold consumer,
is sluggish at higher prices. [] []
APPETITE
Commodities such as oil and base metals as well as gold are
rising, however, on the weaker dollar and hopes the economic
downturn may be bottoming out. []
This has boosted risk appetite across the markets, with
European shares turning higher after a positive session in Asia.
[]
"Investment in commodities is growing," said broker MF
Global in a note. "The rise in interest explains the ability of
commodity markets such as gold and oil to remain relatively
strong despite disappointing fundamental news."
However, some doubts over the health of the global economy
linger. News that China's industrial output rose less than
expected offered another reminder that any recovery might not be
as swift or as strong as investors may hope. []
Silver prices tracked gold higher, reaching an 11-week high
of $14.35 an ounce. Spot silver <XAG=> was bid at $14.26 an
ounce against $14.19.
Among other precious metals, spot platinum <XPT=> was bid at
$1,136 an ounce against $1,130, while spot palladium <XPD=> was
bid at $234 an ounce against $232.50.
The autocatalyst materials suffered last year from a fall in
demand, as the economic slowdown knocked car sales. Hopes the
downturn may be bottoming out has taken some downward pressure
off the market, though bad news is still emerging.
"Although we are bullish on the platinum group metals, a
sustained rally may be difficult to achieve without a modest
recovery in auto demand," said HSBC in a note.
(Reporting by Jan Harvey; Editing by Peter Blackburn)
