* Oil climbs more than $2 a barrel after China cuts rates
* Dollar firmer vs euro as risk aversion increases
(Adds comment; updates prices)
By Jan Harvey
LONDON, Nov 26 (Reuters) - Gold prices slipped on Wednesday
as the firmer dollar against the euro dented interest in the
precious metal as a currency hedge, but rising oil prices were
underpinning the precious metal.
Spot gold <XAU=> was at $813.90/815.90 an ounce at 1520
GMT, up from a low of $808.50 but down from $819.85 an ounce
late in New York on Tuesday.
"This is still a small, volatile market," said Commerzbank
senior trader Michael Kempinski. "(Gold) should find good
support at $750, with an upside target of $850/875.
"There is a strong link to forex at the moment," he added.
The dollar, the main external driver of gold, firmed against
the euro in early trade as dealers were pessimistic a stimulus
package unveiled by the European Commission would be enough to
balance the financial crisis.
Renewed risk aversion after weaker-than-expected durable
goods data from the U.S. boosted the dollar further, as
investors sought a safe haven for funds. []
A stronger dollar tends to pressure gold, which is often
bought as an alternative investment to the U.S. currency.
Oil climbed more than $2 a barrel, recovering from a near 7
percent decline on Tuesday. China's decision to cut interest
rates by 108 basis points boosted hopes a prolonged slowdown in
oil demand can be avoided. []
Firmer crude prices increase interest in commodities as an
asset class, and boost gold's appeal as a hedge against oil-led
inflation. A rise in oil is keeping the market firmly
underpinned this session.
FESTIVE DEMAND
Investors were also turning their attention to the outlook
for physical gold demand from jewellers as the festive season
gets underway.
Gold demand India, in the world's biggest bullion market,
remained lacklustre as prices stayed high, dealers said, while
analysts said the impact of the credit crunch on consumer
spending could keep gold sales low elsewhere.
"Seasonally there is demand for the Christmas and New Year
celebrations, although in light of the global economic slowdown
we would expect jewellery sales to be more subdued this time,"
Fairfax analyst John Meyer said.
Among other precious metals, spot silver <XAG=> was at
$10.38/10.46 an ounce against $10.29.
Spot platinum <XPT=> was little changed at $856/876 an ounce
from $860 late in New York on Tuesday. Sister metal palladium
<XPD=> fell to $189.50/197.50 an ounce against $194.50.
Both metals have slipped dramatically from the highs they
hit earlier in the year, pressured by concern over the dire
outlook for carmakers, the major consumer of the metals, which
are used in catalytic converters.
Toyota Motor Corp had its top-notch credit ratings cut by
Fitch Ratings for the first time in a decade on Wednesday on
fears the global slowdown will hit the car industry hard.
"The negative developments in the industry are so
substantial and fundamental that even the strongest player --
Toyota -- can no longer support the 'AAA' rating," said Fitch
director Tatsuya Mizuno.
(Reporting by Jan Harvey; editing by Karen Foster)
