* Dollar on track for biggest one-day gain in 5 years
* Oil slides $5/barrel, other commodities also drop
* Silver down 6 pct to seven-month low, tracking gold
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Aug 8 (Reuters) - Gold slid as much as 2
percent on Friday to a three-month low as the dollar headed for
its biggest weekly rise in 3-1/2 years, and it looked set to
fall further as investors liquidated commodity holdings.
Gold <XAU=> was at $855.40/857.00 by New York's last quote,
down from $871.05/872.45 late in New York. Earlier the metal
hit a session low of $850.50, its weakest level since May 2.
The precious metal is down nearly $60 an ounce, or 6
percent, from its level in New York late last Friday.
"The main driver at this point is the strength of the
dollar, without a doubt," said Tom Hartmann, a trader at
Altavest Worldwide Trading.
A stronger dollar typically pressures gold, which is often
bought as a hedge against weakness in the U.S. currency.
The dollar surged against the euro on Friday and was on
track for its biggest one-day gain in about five years as
evidence mounted the U.S. economic slowdown is spreading to the
euro zone and around the world, damping the prospects of
interest rate increases. []
Traders also said that a euro zone rate hike was unlikely
in the near future.
"In the near term, there is no immediate sign of a bounce,"
said James Steel, metals analyst at HSBC in New York.
Steel said that better physical off-take from jewelry
buying should eventually cushion the gold market, but gold's
outlook depended on the future directions of the dollar and
oil.
Gold is also being pressured by a sell-off in commodities
nearly across the board, with copper, coffee, sugar and oil all
declining. The broad-based commodity index Reuters-Jefferies
CRB <.CRB> slid nearly 3 percent.
George Gero, vice president of RBC Capital Markets Global
Futures, said that rapid shrinkage of gold's open interest
signaled heavy long liquidation with no new short positions,
and gold could move to a new trading range between $850 and
$900 in the near term.
U.S. crude oil slipped more than $5 a barrel as supply
fears eased and as the firmer dollar prompted funds to exit
commodities. []
Gold and crude oil largely ignored geopolitical tensions
following military conflicts between Russia and Georgia,
because no threat is seen to the commodities' supply
[]
U.S. gold futures for December delivery <GCZ8> settled down
$13.10, or 1.5 percent, at $864.80 an ounce on the COMEX
division of New York Mercantile Exchange.
SEVEN-MONTH LOW
Silver declined in gold's wake, pressured by the firmer
dollar and faltering investor confidence in commodities.
"Silver (is) primarily taking its cue from the stronger
dollar and weaker gold prices," said Barclays Capital.
Silver bullion held by the iShares Silver Trust <SLV.A>,
the world's largest silver-backed exchange-traded fund, fell 1
percent to 6,197.33 tonnes on Thursday, the trust said.
Spot silver <XAG=> fell to $15.30/15.38 an ounce from
$16.14/16.23. Earlier it touched a seven-month low of $15.22 an
ounce.
Among other precious metals, platinum and palladium also
tracked gold lower, pressured by the firmer dollar.
Spot platinum <XPT=> fell to $1,546.50/1,566.50 an ounce
from $1,572.00/1,592.00 late in New York, having earlier given
up 2.5 percent to its session low of $1,531.50.
The metal fell sharply at the beginning of the week to
fresh six-month lows. Platinum prices dropped $180 an ounce in
three sessions as investors worried over the outlook for
demand.
Spot palladium <XPD=> slipped to $328.50/336.50 an ounce
from $344.00/352.00 late in New York.
