* Gold up after Lehman news but off highs as oil plummets
* Oil slides more than $7 a barrel as investors seek haven
* Lehman bankruptcy fuels gold buying as haven from risk
(Updates prices)
By Jan Harvey
LONDON, Sept 15 (Reuters) - Gold was higher on safe haven
buying after Lehman Brothers filed for bankruptcy protection and
as the dollar slipped, but retreated from highs after oil prices
fell more than $7 a barrel.
Platinum and palladium also slipped sharply as investors
worried about the outlook for economic growth, amid fears Lehman
Brothers's insolvency could destabilise the financial sector.
Spot gold <XAU=> was at $769.00/770.20 at 1206 GMT, up $5.55
from Friday's nominal close in New York but off session highs of
$784.90.
"With the kind of turmoil we have had at Lehman's, you would
think there would have been a bit more of a boost," Standard
Chartered analyst Daniel Smith said. "The rebound (in gold) has
been a bit disappointing."
Gold rose sharply earlier in the session as news broke of
Lehman's bankruptcy, spurring buying of gold as a safe haven and
pressuring the dollar. []
A weaker dollar typically benefits gold as it boosts the
precious metal's appeal as an alternative investment.
Traders were further spooked by news that Bank of America
has agreed to buy Merrill Lynch, increasing fears over the
stability of the global financial system. []
But a sharp drop in oil prices has pressured gold more than
$15 from its highs.
Crude fell more than $7 to well below $100 a barrel as
investors sold oil in favour of safer assets, and as Hurricane
Ike spared most Gulf of Mexico oil infrastructure.
[]
Lower oil prices are reducing investors' interest in gold as
an inflation hedge, analysts said.
"Crude oil is trading significantly below the $100/bbl mark,
which is limiting the rebound of gold," said Dresdner Kleinwort
in a note.
Dealers are awaiting the Fed's interest rates decision due
on Tuesday for clues as to the future direction of the U.S.
currency.
ETF SALES
Investor selling of gold held by exchange-traded funds is
also knocking confidence in the precious metal, analysts said.
ETF Securities said on Monday that the amount of gold it
holds to back its Physical Gold <PHAU.L> exchange-traded
commodity fell 16 percent last week to 1.551 million ounces.
[]
The world's biggest gold-backed ETF, SPDR Gold Trust <GLD>,
said its holdings have fallen more than 37 tonnes, or 5 percent,
since the beginning of September.
Among other precious metals, platinum and palladium headed
lower after last week's bounce, tracking losses in the base
metals as investors worried about the outlook for global growth.
"Platinum and palladium are following what is happening in
the base metals, which looks like another round of selling, as
people are increasingly concerned about the outlook for the
economy in the United States," said Mitsubishi precious metals
strategist Tom Kendall.
Spot platinum <XPT=> was down $33.50 at $1,169.00/1,174.00
an ounce, while palladium <XPD=> fell $17 or 7 percent to
$225.50/235.50.
Spot silver <XAG=> slipped 27 cents to $10.56/10.64 an
ounce. Earlier it rallied 3 percent in line with gold to a
session high of $11.15 an ounce.
(Reporting by Jan Harvey; Editing by Michael Roddy)
