* U.S. set to vote on $700 million financial sector bailout
* Dollar up 2 pct versus euro as Fortis rescue scares market
* Oil slides $4 a barrel, pressured by dollar
(Recasts, updates, changes dateline, pvs SINGAPORE)
By Jan Harvey
LONDON, Sept 29 (Reuters) - Gold slipped in Europe on Monday
as expectations the U.S. government will receive approval for a
$700 million bailout of its financial sector curbed safe-haven
buying, and the dollar strengthened.
A $4 slump in oil prices is also pressuring gold, as weaker
crude can undermine sentiment towards commodities as an asset
class.
Spot gold <XAU=> was quoted at $873.85/875.85 at 0938 GMT,
down half a percent from $878.40 at the nominal New York close
on Friday.
"Some of the flight to quality trade (in assets) like gold,
like treasury bonds, even cash, is now being unwound," said
Calyon metals analyst Robin Bhar. "There is a bit of short term
relief in the market."
"The dominating factor is the dollar," he added. A firmer
dollar tends to weigh on gold prices, as bullion is often bought
as an alternative to the U.S. currency when it is weakening.
The dollar climbed 2 percent against the euro as the
financial crisis spread further outside the United States.
News of a state buyout of Fortis Bank, and government
intervention in ailing U.K. mortgage lender Bradford & Bingley,
spooked the market.
The U.S. currency has also been supported by news that the
U.S. Congress is close to agreeing a $700 billion bailout of the
financial sector. []
The other main external driver of gold, the crude oil
market, is also wilting, shedding more than $4 a barrel at its
session low and trading just above $100 a barrel.
Oil was pressured by gains in the U.S. dollar, which makes
dollar-priced oil more expensive for holders of other
currencies. []
"In the crude oil market, participants have realised that
the rescue package would not lead to a quick recovery of
consumers demand," said Dresdner Kleinwort in a note. "Crude oil
is trading lower again...., which is negative for gold."
DEMAND FIRM
Analysts said overall they see gold prices taking good
support from ongoing financial uncertainty and prospects for a
weaker dollar.
Barclays Capital director of commodities Jonathan Spall,
speaking at the London Bullion Market Association's annual
conference in Kyoto, said he belives a near "perfect storm" for
gold may drive prices to within record highs in the next six
months. []
Gold demand from both jewellers and institutional investors
is expected to be supportive, with consumption of gold
jewellery, coins and bars seen picking up significantly as
prices slip to and below $850 an ounce.
Demand from gold-backed exchange-traded funds is also
strong. Holdings of the world's largest bullion-backed ETF, SPDR
Gold Trust <GLD> are at 724.63 tonnes, close to the record
levels they hit last week.
Jeremy Charles, head of the LBMA and a gold trader at HSBC,
told Reuters at the Kyoto conference that he expects private
banks and institutional investors to buy more gold in the
current climate. []
Among other precious metals, silver <XAG=> slipped in line
with gold to $12.91/12.99 against $13.29 at the nominal New York
close on Friday.
Platinum <XPT=> was at $1,107/1,119 an ounce against $1,108
an ounce, while palladium <XPD=> fell more than 1 percent to
$218/224 against $221.
(Reporting by Jan Harvey; Editing by Peter Blackburn)
