* Oil drops to 5-month low as dollar gains, demand weakens
* Dollar hits year high against the euro
* Platinum, palladium tumble on demand worries
(Updates prices, adds comment, rewrites throughout)
By Carole Vaporean and Jan Harvey
NEW YORK/LONDON, Sept 10 (Reuters) - Gold slid to an
11-month low on Wednesday after the dollar rose to its highest
level in a year and crude oil prices dropped to five-month lows
as investors feared U.S. financial sector problems would weaken
the global economy, analyst said.
The dollar, which retained its firmer tone after Lehman
Brothers' quarterly results and divestment plan were released
earlier in the session, dented gold's appeal as a currency
hedge, analysts said. []
Spot gold <XAU=> stood at $752.55/754.15 an ounce, the
11-month low, in late Wednesday business, well below
$775.80/777.80 an ounce in late Tuesday business.
December gold <GCZ8> dropped $29.50, or 3.72 percent, to
close at $762.50 an ounce on the COMEX division of the New York
Mercantile Exchange, fall to its lowest in a year at $756.60.
"The theme for several weeks now has been the repositioning
of long commodity/short dollar positions. That is very much in
effect today. We've had heavy commodity-wide selling today,
including precious metals," said James Steel, precious metals
analyst at HSBC in New York.
Steel added that precious metals sales also reflected tight
credit conditions that have prompted liquidation of commodity
holdings as investors sought cash.
Oil had offered some early support to gold when it rallied
on news oil cartel OPEC unexpectedly agreed to cut its output
by 500,000 barrels a day. []
But crude futures gave up those gains when signs of weak
demand and the strengthening dollar offset the effect of OPEC's
surprise agreement and government reports of energy supply cuts
because of hurricanes in the Gulf of Mexico. []
Lower crude prices typically pressure gold, a hedge against
oil-led inflation.
Investor demand fell as the dollar rose. The world's
largest gold-backed exchange traded fund, the SPDR Gold Trust,
said its bullion holdings dipped more than 10 tonnes, or 1.67
percent, on Sept. 9.
The trust now holds 631.2 tonnes of gold, down from 641.93
tonnes on Monday. The trust has sold some 68.7 tonnes of gold
since its holdings hit a record 705.9 tonnes in July.
"Unless we see a pick-up in ETF demand, (gold) prices will
struggle to gain traction," said Barclays Capital analyst Suki
Cooper.
PGMs FADE
Among other precious metals, platinum and palladium both
fell sharply amid worries about carmakers, major consumers of
both platinum group metals.
China said its passenger car sales fell 6.24 percent
year-on-year in August. []
Platinum fell to an 18-month low of $1,189.50, down more
than 3 percent on the day, while palladium slid more than 5
percent to $219.50, its lowest since November 2005.
Spot platinum <XPT=> was quoted sharply lower at
$1,176.0/1,196.0 an ounce in late Wednesday business than
$1,236.00/1,256.50 an ounce late Tuesday.
Spot hit a low at $1,166.0, last seen in March 2007.
Spot palladium <XPD=> was down at $224.0/232.0 an ounce on
Wednesday from $234.00/242.00 an ounce in late Tuesday
dealings.
"Both have been hit by news from China that passenger car
sales have fallen for the first time in three years," said
Commerzbank analysts in a note.
"The slump in prices could also prompt financial investors
to withdraw further holdings from ETFs," they added.
Traders said the two metals were also sold as part of the
metals complex.
Spot silver <XAG=> dropped to $10.75/10.83 an ounce in late
New York business, down from $11.39/11.47 an ounce on Tuesday.
(Editing by David Gregorio)
