* Bullion hits highest since Apr 2 as dollar dips, oil jumps
* Dollar slides to 4-mth trough versus basket of currencies
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, May 13 (Reuters) - Gold steadied in Europe on
Wednesday after earlier touching a five-week high, as the dollar
recovered some lost ground against the euro, denting the
precious metal's appeal as an alternative asset.
However, prices remain supported by the U.S. currency's
overall weakness, analysts said.
Spot gold <XAU=> touched a peak of $928.30 an ounce, its
firmest since April 2, and was bid at $922.95 an ounce at 1111
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 eased 50 cents to
$923.40 an ounce.
"At the moment, the markets are looking for direction," said
David Wilson, an analyst at Societe Generale. "A weakening
dollar is obviously supportive of gold, and that is coming back
into play."
The dollar managed to regain some lost ground after slipping
to a four-month low against a basket of currencies and a
seven-week trough versus the euro earlier. []
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. []
"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."
But doubts over the health of the global economy linger.
News that euro zone industrial output dived and China's
industrial output rose less than expected offered another
reminder that a recovery might not be imminent. []
Silver prices tracked gold back towards Tuesday's close,
after earlier reaching an 11-week high of $14.35 an ounce. Spot
silver <XAG=> was bid at $14.14 an ounce against $14.19.
Among other precious metals, spot platinum <XPT=> was bid at
$1,125.50 an ounce against $1,130, while spot palladium <XPD=>
was bid at $233 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, although 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.
(Editing by Sue Thomas)
