* Firm U.S. dollar weighs on sentiment
* Slips from 1-week high as oil prices ease
(Updates prices, adds comment)
By Anna Stablum
LONDON, Jan 19 (Reuters) - Gold rose to its highest in a
week on Monday before trimming gains as the dollar strengthened
against the euro and oil prices eased, analysts said.
"It is mostly a story about the U.S. dollar, equity markets
and inflation at the moment," analyst Eugen Weinberg at
Commerzbank said.
Gold had little incentive to move higher, with oil prices
sliding, but firm buying once prices moved towards $800 an ounce
created a floor, he said.
Gold <XAU=> rose as high as $845.55 an ounce, its highest
level since Jan. 12, before trading at $831.85 an ounce by 1516
GMT, down 1.2 percent from $841.85 in New York late on Friday,
as oil prices reversed course and slipped.
Demand from the jewellery industry was seen weak this year,
accounting for 70 percent of total demand for gold, and falling
inflation would also cap prices, Commerzbank's Weinberg said.
Gold is traditionally bought as an inflation hedge and with
inflationary pressures diminishing interest could fade.
"Whilst we recognise the likelihood of spikes above $1,000
an ounce during 2009, we believe that weaker physical demand
limits the potential for a sustained rally in the metal,"
Investec Securities said in a report.
The bank forecasts gold prices at $825 an ounce for 2009,
falling to $800 in 2010 and $750 for 2011, the report said.
A firmer dollar weighed on gold as dollar-priced commodities
tend to fall as the dollar strengthens because it makes them
more expensive for holders of other currencies.
The euro eased to $1.3139 <EUR=> against the dollar on
worries about the health of the euro zone economy after a
ratings downgrade on Spain and grim economic forecasts from the
European Commission. []
OIL WEIGHS
Oil <CLc1> edged lower to around $34 a barrel, having
risen 3 percent in the previous session. []
Sinking oil prices weigh on gold as the metal typically
moves in line with crude, because it is often bought as an
inflation hedge, and the direction of the oil market is an
indicator of interest in commodities.
But dealers said record bullion holdings in SPDR Gold Shares
supported sentiment. Gold holdings in the world's largest gold
exchange-traded fund jumped another 5 tonnes to 795.25 tonnes
last week. []
Platinum <XPT=> was trading at $946.50/951.50 an ounce, down
from $946.50 late on Friday. More than 60 percent of platinum
use goes to autocatalysts to clean exhaust fumes.
More bad news for automakers emerged on Friday as
manufacturers in Japan, Europe and the United States all warned
their businesses continue to struggle and outlooks remained
uncertain. []
"Given this negative dynamic, support for platinum metals
prices from its most important demand sector is foreseeably going
to be missing this year," precious metals group Heraeus said in
a report.
"Despite this, we do not expect a complete collapse in the
platinum-metals prices. As we have been seeing for some months
now, new production is going to slow down as well."
Silver <XAG=> eased to $11.06/11.14 against $11.21 and
palladium <XPD=> traded at $181/186 versus $183 late on Friday.
New York gold futures <GCZ9> added $32.5 an ounce to $846.8.
(Additional reporting by Lewa Pardomuan in Singapore; editing
by Sue Thomas)
