* Gold climbs more than 2 percent to $844/oz
* Crude climbs for fourth straight session on storm fears
* Physical demand for coins, bars remains firm
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By Jan Harvey
LONDON, Aug 28 (Reuters) - Gold prices climbed more than 2
percent in Europe on Thursday as rising oil prices stoked
inflation fears and as the euro firmed against the dollar.
Strong physical demand after gold's recent sharp price fall
also helped push prices over $840 an ounce.
Gold <XAU=> was at $840.75/841.95 an ounce at 1346 GMT from
$826.05/827.45 an ounce late in New York on Wednesday, having
hit an intraday high of $844.00 an ounce.
"Gold is being driven by oil and the higher euro-dollar
again," said Commerzbank senior trader Michael Kempinski.
"There is still some physical demand around, which is pretty
good," he added.
Crude prices climbed for a fourth straight session, boosting
interest in gold as a hedge against oil-led inflation.
Oil rose towards $120 a barrel on fears that Tropical Storm
Gustav may hit the Gulf of Mexico, seat of a number of key U.S.
oil installations, after it morphs into a major hurricane.
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"Oil at $118-119 a barrel is still extremely expensive and
is still very much an inflationary pressure in the market, which
is certainly supportive of gold," said Simon Weeks, director of
precious metals at the Bank of Nova Scotia.
A bounce in the euro against the dollar as expectations for
a euro zone rate hike fall is also boosting interest in gold,
which is often bought as a hedge against dollar weakness.
The euro rose further from a six-month low it hit against
the dollar on Tuesday, after European Central Bank policymakers
including board member Axel Weber played down expectations of a
cut in euro zone interest rates. []
UBS issued a buy recommendation for gold on Thursday, saying
three key conditions it was watching in the gold market --
investor positioning, fundamental demand and the dollar -- have
all been satisfied.
The bank reiterated its $850 an ounce one-month price target
for gold and its three-month target of $900 an ounce.
"If we beat $846 and hold over it, then we have a good
chance of seeing UBS' $850 and beyond," said one London-based
gold trader.
PHYSICAL DEMAND STRONG
Investor demand for coins and bars and expectations of
increased jewellery buying going into the peak-demand autumn
festive season in Asia are also supporting gold prices.
India's Titan Industries <TITN.BO>, which operates one of
the country's largest jewellery chains, told Reuters on Thursday
that it expects the recent revival in gold demand to continue if
prices remain around current levels. []
Silver <XAG=> tracked gold higher to $13.79/13.86 an ounce
from $13.49/13.55 an ounce late in New York on Wednesday.
Among other precious metals, spot platinum <XPT=> tracked
gold up nearly 4 percent to a session high of $1,488.00, before
easing to trade at $1,482.50/1,502.50 an ounce from
$1,434.00/1,454.00 late in New York.
Spot palladium <XPD=> climbed to $294.00/302.00 an ounce
from $288.50/296.50 an ounce.
Both metals have suffered from expectations car demand will
slow as the global economy falters, cutting demand for the PGMs
as components in autocatalysts.
However, Impala Platinum's chief executive on Thursday cited
strong demand as a key driver of platinum prices, which he said
he expects to trade at $1,400-1,600 an ounce over the next six
to 12 months. []
Fears over supply from South Africa -- which is still
suffering from a shortage of electricity -- are still supporting
prices, traders say.
(Reporting by Jan Harvey; editing by Peter Blackburn)
