* Gold hits one-week high as investors return
* Soft dollar, higher oil prices boost gold
* Strong physical demand expected to boost prices further
(Updates prices)
By Pratima Desai and Anna Stablum
LONDON, Aug 21 (Reuters) - Gold prices hit a 10-day high on
Thursday, fortified by investor buying as oil prices rose, the
dollar slipped, equities fell and on expectations of strong
physical demand over coming months.
Gold <XAU=> rose to $839.00 an ounce, the highest since
August 11, and was up at $837.90/839.90 an ounce at 1453 GMT from
$810.35/811.75 an ounce late in New York on Wednesday.
A softer dollar and geo-political concerns were the key
drivers behind the short-term correction within what is an
overall bear market, said Dresdner Kleinwort consultant Peter
Fertig.
"In the medium term, the dollar is going to strengthen again
against the euro and that is going to weigh, not only on crude
oil, but also on gold," he said.
Oil <CLc1> rose to over $121 a barrel after Russia responded
angrily to a U.S. missile shield agreement with Poland, raising
the threat of a supply disruption from the huge energy producer.
[]
"Oil prices at current levels could attract further
investment fund flows into precious metals," Standard Bank said
in a note, adding that technical signals indicated precious
metals were due for a correction.
The firmer dollar in recent months has pulled gold down by
around 20 percent from its all-time high of $1,030.80 an ounce
hit in March, and a lower price has attracted buying.
Demand for gold in top consumer India fell sharply after
prices hit a record but as the country heads into the festival
and wedding season, demand will rise.
"There are signs that physical demand is rising sharply in
response to low prices," said Eugen Weinberg, commodities
analyst at Commerzbank.
"Indian jewellers, for example, are paying far bigger
premiums to gold importers in order to meet the rise in demand.
"Indian demand should rise rapidly over the next few months,
especially with the country's main religious holidays
approaching, which should provide an additional boost."
A weaker U.S. currency makes commodities priced in dollars
cheaper for holders of other currencies. Investors often use
gold as a hedge against financial turmoil and inflation, often
triggered by high oil prices.
European equities fell to three-week lows as oil prices
revived inflation concern, financial stocks slid and worries
about U.S. mortgage lenders Freddie Mac and Fannie Mae mounted.
[]
The number of U.S. workers filing new claims for jobless
benefits fell last week for a second week in a row, the
government said, though they continued at levels that showed a
weakening labor market. []
"Focus is more on the 4-week average and on the continued
claims and not on the initial. Stock markets eased after the
data -- another supportive factor for gold," Fertig said.
In platinum, palladium and silver, the thinking is also that
the recent sell-off has been overdone and that a bounce is due.
But over the longer term, analysts expect platinum's
fortunes to be tied to the health of the global car industry,
which in recent months has experienced sharply declining sales.
Spot platinum <XPT=> was firmer at $1,444.00/1,464.00 an
ounce from $1,368.50/1,388.50 an ounce late on Wednesday.
Earlier, it rose to an intra-day high of $1,450 -- the
highest since August 15.
Palladium <XPD=> was higher at $291.50/299.50 from $281/289
and silver <XAG=> rose to $13.79/13.84, up 5 percent, from
$13.15/13.21. Silver hit an intra-day high of $13.85 -- the
highest since August 15.
(Additional reporting by Anna Stablum; editing by Simon
Jessop)
