* Gold slips as dollar soars to 11-month high versus euro
* Slumping oil prices drag gold, then edge up at close
* U.S. bailout of mortgage finance giants lifts dollar.
(reledes, refreshes throughout, updates prices)
By Carole Vaporean and Anna Stablum
NEW YORK/LONDON, Sept 8 (Reuters) - Gold bullion prices
edged lower late on Monday, unwinding earlier gains as the
dollar rose sharply against the euro after the U.S. government
bailed out the country's two biggest mortgage financers.
Gold prices were pulled off early highs when the dollar
rallied to its highest level against the euro in nearly 11
months. The greenback benefited from the U.S. government's
takeover of giant mortgage financiers Fannie Mae <FNM.N> and
Freddie Mac <FRE.N> in an effort to restore confidence to U.S.
financial markets. []
Spot gold <XAU=> was quoted at $802.25/803.60 an ounce late
Monday, up slightly from $801.10/813.10 an ounce at Friday's
close. It slipped to $800.45/801.85 by 4:00 p.m. EDT (2000
GMT).
December gold <GCZ8> lost $0.30 to end at $802.50 an ounce
on the COMEX division of the New York Mercantile Exchange.
The dollar's rise also hit U.S. crude oil futures, which
fell to their lowest level since mid-April, traders said.
While oil was lower when gold closed, renewed fears of
Hurricane Ike damaging oil facilities in the Gulf of Mexico
later boosted crude to slight gains at the settlement.
Hurricane Ike weakened to a Category 1 storm as it raged
through Cuba, but it remained on path toward U.S. oil fields in
the Gulf of Mexico. []
While the surging dollar pushed gold lower, some analysts
said jitters about the financial sector could limit losses.
"Gold is continuing to reflect systemic issues. The Fannie
and Freddie situation is symptomatic of overall banking system
fear. People are moving into gold because they're looking at
more bank failures," said Frank McGhee, head precious metals
trader at Integrated Brokerage Services in Chicago.
On a technical basis, he added, gold held up well.
"We saw an attempt to take gold down with the euro and it
failed. You saw short-covering coming into the market at the
lows. Now gold is just trying to hold the line," said McGhee.
The U.S. government acted on Sunday to seize control of
Fannie Mae and Freddie, hoping to temper the global financial
market turbulence. [] Investors initially took the
takeover as an excuse to pile back into riskier assets.
Alexander Zumpfe with Heraeus Metallhandelsgesellschaft
said he thought gold's tone was somewhat positive and noted
good physical demand, notably from retail investors.
Gold, seen as a hedge against inflation, often moves in the
opposite direction of the dollar as it becomes cheaper for
investors holding other currencies.
Traders said the gold market needed more time to see the
impact of the bailout.
"It is a reason to be less bullish on the dollar, but not
bearish," Tom Kendall of Mitsubishi said, adding that the
knock-on effect on commodities could be brief.
A firm U.S. currency makes dollar-priced commodities more
expensive to holders of other currencies and tends to cap
prices.
Gold hit a year-to-date low of $773.90 on Aug. 15.
Spot silver <XAG=> tumbled to $12.05/12.11 an ounce, down
from $12.19/12.27 an ounce on Friday. It had fallen as low as
$11.87 an ounce, its lowest level in a year because of its use
as an industrial metal.
Traders said silver lost ground with gold. But they added
that some investors, fearing protracted economic slowing, were
bailing out of many raw materials, including silver.
Spot platinum <XPT=> slid to $1,337.00/1357.00 an ounce in
late Monday business, from Friday's quote at $1,391.50/1,411.50
an ounce.
Spot palladium <XPD=> added to losses for a late Monday
quote of $258.0/266.0 an ounce, down from $267.00/275.00 late
Friday.
(Additional reporting and Clare Black in London; Editing by
David Gregorio)
