* Oil gives up gains after U.S. crude inventory data
* Dollar hits 11-month high against the euro
* Platinum, palladium fall on demand worries
(Updates throughout, adds comment)
By Jan Harvey
LONDON, Sept 10 (Reuters) - Gold eased on Wednesday as crude
prices gave up their gains after U.S. oil inventory data, and as
the dollar rose to a fresh eleven-month high against the euro.
The stronger dollar, which retained its firmer tone after
Lehman Brothers' quarterly results and divestment plan were
released earlier in the session, is denting gold's appeal as a
currency hedge, analysts said. []
Spot gold <XAU=> was at $765.00/766.20 an ounce at 1511 GMT
against $775.80/777.80 in late New York on Tuesday. Earlier it
touched a session low of $762.55, its weakest since Oct 2007.
Oil had been supporting gold after it rallied more than $1 a
barrel on Wednesday after oil cartel OPEC unexpectedly said it
would cut its output by 500,000 barrels a day. []
Dresdner Kleinwort analyst Peter Fertig said it will not be
possible to call a bottom to the gold market until the weekly
oil inventory data has been digested.
Firmer crude prices typically benefit gold, which is often
bought as a hedge against oil-led inflation.
Investor demand remains sluggish, however, as the dollar
takes on a firmer tone. The world's largest gold-backed exchange
traded fund, the SPDR Gold Trust, said its bullion holdings
dipped more than 10 tonnes, or 1.67 percent, on Sept. 9.
The trust now holds 631.2 tonnes of gold, down from 641.93
tonnes on Monday. The trust has sold some 68.7 tonnes of gold
since its holdings hit a record 705.9 tonnes in July.
"Unless we see a pick-up in ETF demand, (gold) prices will
struggle to gain traction," said Barclays Capital analyst Suki
Cooper.
PGMs FADE
Among other precious metals, platinum and palladium both
slipped sharply as investors worried about the outlook for
demand from carmakers, who are major consumers of both platinum
group metals.
China said its passenger car sales fell 6.24 percent
year-on-year in August. []
Platinum fell to an 18-month low of $1,189.50, down more
than 3 percent on the day, while palladium slid more than 5
percent to $219.50, its lowest since November 2005.
"Both have been hit by news from China that passenger car
sales have fallen for the first time in three years," said
Commerzbank analysts in a note.
"The slump in prices could also prompt financial investors
to withdraw further holdings from ETFs," they added.
Spot platinum <XPT=> later recovered to trade at
$1,190.00/1,210.00 an ounce against $1,236.00/1,256.50 late in
New York on Tuesday. Palladium <XPD=> was at $226.00/234.00
against $234.00/242.00.
Silver <XAG=> fell to $10.98/11.02 from $11.39/11.47.
(Reporting by Jan Harvey; editing by Peter Blackburn)
