* Dollar firms against euro after Trichet comments
* Oil dips by over $2 a barrel on U.S. fuel stocks report
* Physical buying supports
(Recasts, updates throughout)
By David Sheppard
LONDON, Sept 4 (Reuters) - Gold pared early gains to slip
back below $800 an ounce late on Wednesday as the dollar resumed
an upward trend against the euro and oil prices slipped more
than $2 a barrel.
Prices had risen early in the session on strong physical
buying as jewellers took advantage of gold's fall towards a
nine-month low near $790 an ounce on Wednesday.
However, with the dollar again rising against the euro in
the wake of comments from European Central Bank President
Jean-Claude Trichet that the euro zone was in a period of weak
economic activity, gold gave up its gains. []
Gold <XAU=> rose to a day high of $814.70 an ounce before
reversing to trade at $795.90/797.10 at 1535 GMT from
$800.05/801.65 an ounce late in New York on Wednesday.
Weaker oil prices also weighed on sentiment, with gold's
appeal as an inflation hedge diminished as crude prices dropped
by more than $2 a barrel. []
"Physical demand is holding up well, if not quite at the
very strong levels we've been seeing lately -- but it's still
historically strong," said UBS analyst John Reade
"The speculative market is a bit sold-out at the moment so
the dollar's strength this afternoon is perhaps having less
impact than it normally would."
UBS is one of the largest gold dealers and the investment
bank said it had seen its strongest physical sales in the past
20 years over the last two weeks.
The dollar's recent rally has reduced gold's appeal as a
hedge against weakness in the U.S currency, with bullion prices
down from $980 an ounce seen when the dollar hit its all-time
low against the euro back in mid-July.
Many analysts see gold trading in a tight range in the
near-term as investors try to gauge the impact of higher gold
sales at lower price levels versus the impact of the dollar's
near 17 cent recovery against the euro over just six week.
EID AL-FITRI
International dealers saw purchases from jewellers in
Indonesia ahead of the Eid al-Fitri Muslim holidays in October
and safe-haven buying from Thailand, where Prime Minister Samak
Sundaravej refused despite street campaigns against him.
[]
Demand from India, the world's largest consumer, and also
the Middle East have helped to stem gold's decline from above
$980 an ounce back in mid-July.
However, there are concerns that strong demand during August
from key market Turkey may falter due to volatile prices and the
end of the wedding season. []
Platinum pared early losses, which saw the metal slip to a
two-week low in Asian trade, to rally by over 2 percent as
gold's moved higher helped to move the metal off its lows.
Spot platinum <XPT=> hit an intraday low of $1,318 an ounce,
down from $1,377.50/1,397.50 late in New York on Wednesday,
before rebounding to trade at $1,389.00/$1,411.00 an ounce.
Platinum has fallen by almost 40 percent since touching a
record high of $2,290 an ounce back in March.
Concerns over falling car sales in the U.S. and Europe have
dented sentiment, but some automakers may be looking to buy at
these lower levels, analysts said.
Autocatalysts, used to clean exhaust fumes, account for more
than half of global platinum use.
Platinum's sister metal palladium <XPD=> eased to
$282.00/290.00 an ounce from 282.50/290.50, while silver <XAG>
slipped to $12.77/12.82 an ounce from $12.84/12.97 an ounce.
(Reporting by David Sheppard; editing by Christopher
Johnson)
