* Dollar retreats from 2-week highs against the euro
* Oil drops $2 barrel; traders await U.S. stocks data
* Platinum climbs 3 pct after losses but quickly sheds gains
(Updates prices, adds comment)
By Jan Harvey
LONDON, Nov 12 (Reuters) - Gold slipped 1 percent on
Wednesday as the dollar firmed and weaker oil prices weighed on
the market, but firm physical demand was underpinning prices.
Traders were awaiting data on U.S. crude inventories due on
Thursday to give fresh direction to the oil market, which should
influence gold.
Spot gold <XAU=> was at $719.00/721.00 at 1525 GMT against
$731.70 an ounce late in New York on Tuesday. The metal fell 2
percent in that session as the dollar firmed against the euro.
A stronger dollar tends to dent interest in gold, which is
often bought as an alternative investment to the U.S. currency.
"Gold is back to trading up and down according to what the
dollar is doing," said Stephen Briggs, commodity strategist at
RBS Global Banking & Markets.
Briggs said gold was being pressured in opposite directions
by strong interest in gold products such as jewellery, coins and
bars and physically-backed ETFs on the one hand, and fund
selling on the futures market on the other.
"Physical investment has been pushing gold up, but the paper
market has been pushing it down," he said.
Physical demand for gold jewellery, coins and bars is
underpinning prices at lower levels, with dealers reporting
strong buying in major bullion market India as the wedding
season gets underway.
In Europe, refiners are struggling to keep up with demand
for certain products, according to traders.
Chinese investment demand is gathering pace this year, with
investment reaching 38.4 tonnes in the first nine months of 2008
against 24 tonnes for the whole of 2007, the China National Gold
Corp said at a conference. []
However, the dollar was still the primary factor influencing
the market, analysts said. The U.S. currency rose on Wednesday,
boosted by a flight to safety amongst investors spooked by the
global economic downturn. []
OIL FALLS
Crude oil, the other main external driver of gold, shed more
than $2 a barrel as fears the economic slowdown will knock
demand offset news of supply reductions. []
Traders were awaiting fresh direction from U.S. oil
stockpiles data, due out on Thursday at 1535 GMT.
UBS cut its gold price forecast for 2009 by 15 percent to
$700 an ounce, and its price view for platinum that year by 18
percent to $900 an ounce.
"Gold will remain under pressure in 2009 from a
combination of slowing demand for jewellery from important
emerging markets and disinvestment as inflation slows and the
dollar continues to strengthen," it said in a report.
Among other precious metals, platinum rose 3 percent to a
high of $840 an ounce, recovering some of Tuesday's $34-an-ounce
dip, but quickly shed gains in later trade as oil and other
commodities softened.
No.3 platinum producer Lonmin <LMI.L> <LONJ.J> said a strike
by more than 2,000 union members had halted production at its
Limpopo mine. []
"High production costs, power shortages in South Africa, and
interruptions caused by strikes and accidents are all factors
which should help to stabilise the price of platinum,"
Commerzbank said in a research note.
Spot platinum <XPT=> was later quoted at $811.50/831.40 an
ounce against $812.50 an ounce late in New York on Tuesday. Spot
palladium <XPD=> was at $211/219 an ounce against $212.
Spot silver <XAG=> was at $9.45/9.53 an ounce against $9.74.
(Reporting by Jan Harvey; editing by Karen Foster)
