* Gold climbs as dollar wilts versus euro
* Oil prices rally more than $7 a barrel
* Silver, platinum also post gains
(Updates with quotes, closing prices, market activity)
By Jan Harvey
LONDON, Sept 19 (Reuters) - Gold rose almost 2 percent on
Friday, recovering from earlier losses, as the dollar slipped
sharply versus the euro and oil rallied more than $7 a barrel.
Gold slipped more than 3 percent earlier in the session
after the U.S. government said pledged $50 billion to guarantee
money-market mutual funds, curbed short-selling and crafted a
sweeping plan to mop up toxic mortgage debt, sending global
stock markets soaring. []
However, a turnaround in the foreign exchange markets that
sent the euro to session highs against the dollar, coupled with
a sharp rise in the oil price, helped the metal rally to a day
high of $868.65 per ounce.
At New York's last quote of 2:25 p.m. EDT (1825 GMT), spot
gold <XAU=> was at $862.20/866.20, against $847.25 an ounce at
the nominal New York close on Thursday.
The euro <EUR=> gained ground against the dollar and crude
prices rallied as investors digested the implications of a
mooted U.S. government plan to deal with toxic bank assets.
A weaker dollar typically benefits gold, which is often
bought as a currency hedge.
"The impact of the plan has been for the dollar to weaken,
and essentially that has been the catalyst for a move up in all
markets," said Calyon analyst Robin Bhar.
"Equities are exploding, base metals are higher and gold as
well has taken part."
Sharply higher global markets also prompted investors to
switch funds to the equities from the commodity sector.
Leonard Kaplan, president of Prospector Asset Management,
said that while the U.S. government bailout plan was highly
inflationary, it would take gold traders time to sift through
the potential implications of the various proposals.
U.S. gold contract for December delivery <GCZ8> settled
down $32.30, or 3.6 percent, at $864.70 an ounce on the COMEX
division of the New York Mercantile Exchange.
Gold has benefited from a wave of risk aversion that has
hit the markets this week after U.S. investment bank Lehman
Brothers filed for bankruptcy protection on Monday.
Prices soared nearly $140 an ounce from last Friday's
nominal New York close to this week's high, while Wednesday saw
the largest one-day dollar gold price rise in history.
The metal rallied above $900 an ounce in late Thursday
trade as investors fled rocky equity markets for safer assets
such as bullion.
POTENTIAL REMAINS
Analysts say gold in the longer term may benefit from
continued uncertainty surrounding the financial sector, as well
as tight underlying fundamentals.
Investment demand remains firm, with the world's largest
bullion-backed exchange-traded fund, the SPDR Gold Trust <GLD>,
reporting a further 4.5 tonne inflow on Thursday. Its holdings
have risen nearly 7 percent since Monday. []
Demand for gold jewellery, coins and bars is also expected
to pick up as the festival season gets underway in major
consumer India, although high prices may curb buying.
Among other precious metals, silver rallied 5 percent in
gold's wake to a session high of $12.53, before settling back
to $12.38/12.43 from its Thursday nominal close of $11.84.
Platinum also rose sharply, tracking gold higher. Spot
platinum <XPT=> last quoted at $1,126.00/1,166.00, against
$1,089.00 at the nominal New York close on Thursday.
Spot palladium <XPD=> was at $231.50/241.50 against
$230.00, up from a session low of $221.00.
"We see value emerging again in the PGMs, especially in
palladium which is near range lows amidst a market that is
running down its above-ground inventory and talk of mine stress
continues to build in Russia," said JP Morgan analyst Michael
Jansen in a note.
(Additional reporting by Frank Tang in New York; Editing by
Marguerita Choy)
