* Oil soars on U.S. energy inventory fall, helps gold
* Dollar gives up initial gains against euro
* Jewellery demand dips in Q2, seen firmer as prices ease
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Aug 13 (Reuters) - Gold ended 1.4 percent
higher on Wednesday as crude oil prices surged in response to a
dip in U.S. oil product stocks, and on expectations jewellery
demand will recover after the precious metal's recent price
slip.
Gold <XAU=> was at $825.85/826.85 by New York's last quote
at 2:15 p.m. EDT (1815 GMT), up from $814.50/815.50 an ounce
late in New York on Tuesday.
"The oil market has been (significant) not just because it
is a leading commodity but because the dollar has been reacting
to it," said VM Group analyst Matthew Turner.
Rising oil prices typically benefit gold, which is often
bought as a hedge against oil-led inflation. Firmer oil also
boosts interest in commodities as an asset class, and can have
wider implications.
Crude rose by more than $4 to above $116 a barrel after the
U.S. Department of Energy reported a sharp fall in gasoline
inventories and a larger than expected dip in distillate
stocks. []
On Tuesday, gold tumbled to $801.90 ounce, its lowest level
in eight months, largely on a surge in the dollar. The metal
usually moves in the opposite direction to the U.S. currency,
for which it is often bought as an alternative investment.
"We are oversold, and the market is indicating a lack of
overhead selling, which flooded the market in the last four to
five days and had accelerated when December gold fell below
$850. It has run its course now," said George Nickas, commodity
trader at FC Stone in New York.
U.S. futures for December delivery <GCZ8> settled up
$16.90, or 2.1 percent, at $831.50 on the COMEX division of New
York Mercantile Exchange.
In euro terms, gold fell to 538.80 euros an ounce, also its
weakest since December.
The precious metal ticked up in early European trade on
Wednesday as the dollar came off highs against the euro, but
has held those gains even as the U.S. currency recovered.
"The fact that precious metals are higher in spite of the
up day in the U.S. dollar today suggests that there is some
physical off-take in bullion down at these lower prices," JP
Morgan analyst Michael Jansen said.
The dollar, however, gave up its early gains and traded
lower against the euro by afternoon.
According to a report by the industry-funded World Gold
Council, global gold jewellery demand was down 24 percent in
the second quarter as high and volatile prices curbed buying.
[]
DATA WATCHED
Looking forward, consumer prices and industrial production
data from the United States and European inflation data are all
due this week and are likely to affect the currency markets, a
key driver of gold.
Among other precious metals, silver <XAG=> was higher at
$14.81/14.88 an ounce from $14.60/14.66 late in New York on
Tuesday.
Holdings of the world's largest silver-backed
exchange-traded fund, the iShares Silver Trust <SLV.A>, dipped
half a percent to 6,166.57 tonnes on Monday, the last day for
which the trust has reported.
Platinum bounced back above $1,500 an ounce on Wednesday
before easing, having shed more than 15 percent in the two
weeks to Tuesday's close on fears over weakening demand from
the car industry.
Spot platinum <XPT=> rose to a session high of $1,510.00 an
ounce and ended at $1,501.00/1,521.00 from its previous close
of $1,469.50/1,489.50 late in New York.
Palladium meanwhile slipped back towards key support at
$300 an ounce. On Tuesday, it touched a low of $298.00, its
weakest level in almost two years, before recovering.
Spot palladium <XPD=> was at $317.50/325.50 an ounce from
its previous U.S. finish of $305.00/313.00 an ounce.
(Editing by Christian Wiessner)
