* Oil bounce fuels inflation fears
* Banking fears support gold
* Platinum at lowest level since early May
(Updates prices, adds details)
By David Sheppard
LONDON, July 17 (Reuters) - Gold recovered on Thursday after
a rebound in oil prices boosted buying of the precious metal as
a hedge against fuel-led inflation.
Spot gold <XAU=> rebounded to hit a day high of $974.30 an
ounce, having slipped as low as $953.20 earlier in the day when
oil prices dipped. By 1550 GMT, spot gold was trading at
$970.60/971.60 against $963.10/964.10 in late New York trades on
Wednesday.
On Tuesday, gold hit a four-month high of $987.75 an ounce
after rallying on concerns over the stability of the U.S.
financial system, with investors looking for a safe store of
wealth during times of uncertainty.
"Gold's mainly been tracking oil and the dollar today,
having risen largely on banking concerns over the past week,"
said Standard Chartered trader Tony Dobra.
"I think we could see it break higher due to the
inflationary and negative economic news coming out."
Gold tends to trade in the opposite direction to the dollar
and in line with oil, as it serves as an alternative asset to
the U.S. currency and as a hedge against fuel-led inflation.
Bank stocks in the United States and Europe have recovered
over the past couple of days, but analysts say many investors
remain concerned about financial risks, boosting gold back
towards $1,000 an ounce.
"The longer-term trend for gold is still intact," said
Merrill Lynch analyst Daniel Hynes.
Platinum fell to its lowest level since early May after
South African state-owned power utility Eskom said it was
confident the country would go through the winter months without
power cuts.
Energy shortages in the world's number one platinum producer
have boosted prices this year due to concerns mine output would
be constrained.
"We have become somewhat concerned about the short to
medium-term view for the platinum group metals," JPMorgan said
in a note. "A pullback towards $1,800 an ounce in platinum looks
likely in the medium term, while palladium looks like it could
trade towards $400 an ounce."
Spot-platinum <XPT=> hit a two-month low of $1,877.50 an
ounce, before recovering slightly to trade at $1,891.50/1,911.50
from $1,913.50/1,933.50.
Sister metal palladium <XPD=> fell to $423.00/$431.00 from
$430.50/438.50.
Silver <XAG=> was up at $18.94/19.00 from $18.71/18.80.
(Editing by Christopher Johnson)
