* Oil down over $7, eyes $100 a barrel
* Dollar hits fresh 2008 highs
* Silver down more than 5 percent
* Platinum drops 3 percent on fears of falling demand
* Palladium drops 5 percent
(Updates throughout)
By David Sheppard
LONDON, Sept 2 (Reuters) - Gold dropped more than 3 percent
to beneath $800 an ounce on Tuesday, after a steep drop in oil
prices and a rally in the dollar reduced bullion's appeal.
Gold <XAU=> fell to a low of $790.40 an ounce -- its lowest
level since Aug. 19 -- before recovering slightly to trade at
$798.00/798.90 an ounce at 1423 GMT from $817.15/818.75 an ounce
late in London on Monday.
Silver, platinum and palladium also fell heavily, losing
between 3 and 5 percent.
"Gold's leading the way down," said Commerzbank trader Rory
McVeigh. "We've seen a shift in emphasis where people are now
selling commodities to move their assets back into dollars."
The dollar extended its rally to a 10-1/2-month high against
a basket of currencies on Tuesday, with a near $7 drop in oil
prices fuelling the currency's recovery. []
The boom in gold and oil prices over the past year has been
fuelled in part by weakness in the U.S. currency, with investors
buying commodities as a hedge against the greenback's decline to
multi-year lows.
With the dollar now strengthening, investors have been
unwinding commodity positions, with base metals, soft and
agricultural commodities all falling on Tuesday.
The dollar has taken an extra boost from the decline in oil
prices, with the outlook improving for the United States' energy
intensive economy.
"The reverse correlation between the dollar's recovery
against the euro and the gold price has been quite impressive
lately," said Standard Chartered analyst Daniel Smith.
"Gold investors are watching the oil price very closely and
with oil coming down, prices have come off."
The relationship between moves in oil and the dollar's
recovery has weighed doubly on gold, as the precious metal
generally acts as hedge against fuel-led inflation and as an
alternative investment to the U.S. currency.
Gold has lost more than 20 percent in value since spiking to
an all-time high of $1,030.80 in March.
Since July, the dollar has recovered about 15 cents from its
all-time low of $1.60 against the euro, while crude prices are
now about $40 below all-time highs seen above $147 a barrel in
the same month. []
Physical buying has kept gold supported near $800 an ounce,
with rising evidence demand from Indian jewellers is returning
now prices have come off their highs. []
Gold imports into India -- one of the top consumers of the
metal -- jumped 45 percent in August year-on-year, the first
annual rise seen in 2008. []
Dealers in Delhi said demand was expected to rise ahead of
the Indian festival season, while jewellers in the Middle East
said they had seen resurgent buying recently. []
Turkish gold imports soared by 70 percent in August to 47.2
tonnes, however they are down by around 25 percent for the first
eight months of the year. []
ALL FALL DOWN
Declines in gold have added to pressure on other precious
metals already faltering due to concerns over slowing demand.
Spot platinum <XPT=> dropped to a low of $1,363.50 an ounce
from $1,439.00/1,451.00 late in London, before edging back to
$1,380.00/1,400.00 an ounce.
Rising concerns about demand for autocatalysts due to poor
car sales and a slowing U.S. economy have hit prices hard,
dragging them some 40 percent lower from the all-time high of
$2,290 an ounce back in March.
"Japanese sales of automobiles in August were below 200,000
cars, so it's very bad figure. The platinum price is under
pressure. It's a very bearish factor," said Kazuhiko Saito of
Interes Capital Management in Tokyo.
Automobile sales in Japan, excluding 660cc mini-vehicles,
tumbled 14.9 percent in August year-on-year to 193,902 vehicles.
Sales for August fell short of 200,000 vehicles for the first
time in 37 years. []
Autocatalysts, used to clean exhaust fumes, account for more
than 50 percent of global platinum demand.
Platinum's sister metal palladium <XPD=> fell over 5
percent, touching a low of $280.50 an ounce before recovering to
$284.00/292.00 from $297.00/305.00 an ounce in late London
trades on Monday.
Silver <XAG=> tracked gold down, hitting a low of $12.47 an
ounce from $13.40/13.46 an ounce, before edging back up to
$12.73.
(Reporting by David Sheppard; editing by Christopher
Johnson)
