* Dollar regains ground against a basket of currencies
* Oil prices slip more than $2/bbl after 5 percent gains
* Firm demand for physical gold underpins prices
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, Aug 22 (Reuters) - Gold prices eased on Friday as
the dollar rebounded against the euro and oil prices dropped by
more than $1 a barrel, denting the precious metal's appeal as an
inflation hedge.
Strong demand for physical gold stocks, such as coins and
bars, is continuing to underpin the market, however.
Gold <XAU=> slid to $821.30/822.30 an ounce in European
trade by 1301 GMT from $832.40/833.40 an ounce late in New York.
New York gold futures for December delivery <GCZ8> slipped
$11.80 an ounce to $827.20.
"The outlook for the U.S. dollar clearly remains to
strengthen against the euro," said Dresdner Kleinwort consultant
Peter Fertig. "We expect the European Central Bank will cut
rates in the first quarter of next year."
"With oil prices coming down, headline inflation should
decline considerably next year and that would be another nail in
the coffin of the gold bulls," he added.
The dollar rebounded against the euro on Friday, dampening
gold's early gains. The precious metal is often bought as an
alternative investment to the dollar, and tends move in the
opposite direction to it.
The greenback fought back from the previous day's losses
versus a basket of major currencies on Friday, helped by easing
oil prices. []
Oil slipped after surging nearly 5 percent on Thursday, its
biggest percentage gain in more than two months, as tensions
between Russia and the U.S. escalated. Crude slid more than $2 a
barrel to below $120 on Friday. []
Gold is rolling back some of the gains it made on Thursday,
when it surged to a one-week high of $839.00 as demand for bars
and coins soared, and dollar weakness fuelled interest in
commodities as an asset class.
The Reuters/Jeffries CRB <.CRB> global commodities index is
on track for its biggest weekly gain since 1975. []
DEMAND FOR COINS, BARS SURGES
Although it is currently on the back foot, gold is up nearly
$50 an ounce from the nine-month low of $773 it reached last
Friday, as investors in physical gold stocks returned to the
market.
The U.S. mint said in a statement on Thursday that it was
temporarily suspending sales of its American Eagle bullion coins
due a shortage as demand soared. []
European traders also reported that producers were
struggling to keep up with demand for some finished products.
Among other precious metals, silver <XAG=> slid to
$13.33/13.37 an ounce from $13.80/13.87 an ounce.
Spot platinum <XPT=> eased to $1,424.50/1,444.50 an ounce
from $1,449.50/1,469.50 an ounce late in New York, having hit a
1-week high of $1,472.50 earlier on Friday.
Its sister metal palladium <XPD=> inched down to
$283.00/291.00 an ounce from $286.00/294.00 an ounce.
Both the platinum group metals are recovering after
suffering a major sell-off in the wake of a spate of bad
financial reports from carmakers, who consume around half of the
world's platinum each year.
"Platinum has had a disastrous July and early August as
fears over a collapse in global car sales... completely
overshadowed the few reminders of the metal's precarious supply
situation," said Fortis Bank in a monthly report.
"This trend may continue, but the risk of another supply
squeeze should keep investors interested over the long-term," it
added.
(Reporting by Jan Harvey; editing by xxxx)
