UPDATE 6-Gold hits 4-month low below $850 as dollar rises

                                
 (Updates with quotes, prices)
                                
 By Tamora Vidaillet and Atul Prakash
                                
 LONDON, May 1 (Reuters) - Gold slipped to a four-month low
below $850 an ounce on Thursday, as a sharp rise in the dollar
lowered gold's appeal as an alternative investment and triggered
a sell-off in precious metals.
                                
 Silver and palladium hit three-month lows, while platinum
shed 3 percent to a one-month low below $1,850 an ounce.
                                
 Gold <XAU=> fell as low as $847.10 an ounce after rising to
a high of $881.30. It was quoted at $851.75/852.95 at 1537 GMT,
against $864.65/866.05 in New York late on Wednesday.
                                
 "I think $850 is enough for now, but longer-term I expect to
see (gold at) the 200-day moving average, currently at $822,
before the correction will be complete," Simon Weeks, managing
director of precious metals at Bank of Nova Scotia, said.
                                
 "Sentiment has been bearish for a while, but it's time to
take a breather around this level before moving lower again. We
see some physical and technical buying, but I think there will
be better bargains in the coming days."
                                
 Precious metals came under pressure mainly because of the
dollar, which rose to fresh five-week highs against the euro
after a key U.S. manufacturing index for April came in slightly
better than expected.
                                
 A firmer dollar makes gold costlier for holders of other
currencies and often lowers bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
                                
 Crude oil futures fell below $113 a barrel in choppy
trading, but found some support from a supply disruption in
Nigeria.
                                
 "There is a certain investor fatigue that has crept in the
market in the last few weeks and I think it is going to take a
bit of oomph to get it going again," said Stephen Briggs,
economist at SG Corporate and Investment Banking.
                                
 
                                
 ETFS SUFFER
                                
 U.S. gold futures also declined sharply, with the active
contract for June delivery <GCM8> falling $12.70 an ounce to
852.40 an ounce.
                                
 Dealers expected volatile days ahead after a drop in bullion
holdings in StreetTRACKS Gold Shares <XAUEXT-NYS-TT>, the
world's largest gold exchange-traded fund, to 580.45 tonnes as
of Wednesday, shedding nearly 10 percent in the last 10 days.
                                
 "We have fallen through a couple of support levels," said
Tom Kendall, metals strategist at Mitsubishi Corporation. 
                                
 "There is more downward potential. We have got quite a lot
of data out of the U.S. over the next two days and that will
determine where the dollar goes from here in the short term."
                                
 In industry news, Gold Fields <GFIJ.J> said it had suspended
some operations at its South Deep mine in South Africa after an
accident that killed nine contract workers. [ID:nL01737437]
                                
 Spot platinum <XPT=> fell below $1,850 an ounce before
rising to $1,858/1,878, against $1,906/1,921 late on Wednesday.
                                
 Silver <XAG=> fell to a low of $15.97 an ounce and was last
quoted at $16.17/16.22, versus $16.60/16.65. Spot palladium
<XPD=> was at $401/409 an ounce after falling to a low of $397,
against $410.50/418.50 late on Wednesday.
  (Reporting by Tamora Vidaillet; editing by Chris Johnson)