* Dollar firmer vs euro as risk aversion increases
* Long-term inflation worries support gold
* Indian physical gold demand in focus
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Nov 26 (Reuters) - Gold ended slightly
lower on Wednesday as a firmer dollar against the euro dented
interest in the precious metal as a currency hedge, but worries
about longer-term inflation were underpinning the precious
metal.
Spot gold <XAU=> was at $813.65 at 2:17 p.m. EST (1917
GMT), down 0.8 percent from Tuesday's close of $819.85 an ounce
late in New York on Tuesday.
U.S. gold futures for February delivery <GCG9> settled down
$9.20, or 1.1 percent, to $811.30 an ounce on the COMEX
division of the New York Mercantile Exchange.
"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 on
renewed risk aversion after weaker-than-expected durable goods
data, 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.
Massive market stimulus plans from central banks also
stirred inflation concerns, traders said.
"Everybody sees inflation down the road. We are going to
have a deficit next year in the trillions. How are they going
to do that without inflating? So, gold will eventually be much
higher," said Jonathan Jossen, COMEX gold options floor
trader.
Oil climbed nearly 7 percent to over $54 a barrel. 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 jewelers as the festive season
gets underway.
Gold demand in India, in the world's biggest bullion
market, remained lackluster 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 jewelry sales to be more subdued this time,"
Fairfax analyst John Meyer said.
Among other precious metals, spot silver <XAG=> was at
$10.20, down 0.9 percent from Tuesday's finish of $10.29.
Spot platinum <XPT=> fetched $855.00, 0.6 percent lower
than Tuesday's late quote. Sister metal palladium <XPD=>
fetched $189, down 2.8 percent from its previous close of
$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 Frank Tang; Editing by Marguerita Choy)
