* Gold ends more than 2 pct down as commodities sell off
* Firmer dollar, weaker oil encourage selling of bullion
* Market focuses on Federal Reserve's inflation comment
(Recasts, updates with quotes, closing prices, market activity,
adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Aug 5 (Reuters) - Gold ended 2 percent lower
on Tuesday amid widespread losses in commodities, as the market
digested inflation comments by the U.S. Federal Reserve which held
interest rates steady.
Gold <XAU=> fell as low as $875.10 an ounce on Tuesday, its
weakest level in nearly six weeks.
It was at $876.35/877.95 an ounce by New York's last quote on
Tuesday, down from $895.55/896.95 late in New York in the previous
session.
The dollar reached a new seven-week high against a basket of
currencies, further dampening interest in gold. Traders are
awaiting the rates announcement of the U.S. Federal Reserve later
in the session.
A firm dollar typically pressures gold as it dents the
precious metal's appeal as an alternative investment.
[]
"Gold has sold off on oil's steep falls and with sharp falls
in many other commodity markets," said Mark O'Byrne, executive
director of Gold and Silver Investments.
"The CRB Reuters Jefferies Commodity Index was down 3 percent
yesterday, its largest one day sell-off since last March," he
added.
Falling oil prices are also weighing on gold. U.S. crude
futures slipped to a three-month low of $118 a barrel as traders
focused on rising OPEC supply and easing demand in the United
States and Europe. []
Gold tends to track movements in crude, as it is often bought
as a hedge against oil-led inflation. Weaker oil prices also
undermine sentiment toward commodities as an asset class.
FED COMMENT FOCUSED
After the end of New York's pit session, the Federal Reserve
held key U.S. interest rates steady at 2 percent, expressing
concerns over both economic growth and inflation and offering few
clues as to when it might push borrowing costs higher.
[]
"Although downside risks to growth remain, the upside risks to
inflation are also of significant concern," the Fed said in a
statement.
The Fed said that it expected inflation to moderate later this
year and next year, but the inflation outlook remained "highly
uncertain."
U.S. gold futures for December delivery <GCZ8> settled down
$21.80, or 2.4 percent, at $886.10 an ounce on the COMEX division
of the New York Mercantile Exchange.
Among other precious metals, platinum and palladium rebounded
after posting sharp losses earlier in the session when platinum
hit a fresh six-month low of $1,517 an ounce.
The white metal, chiefly used to make autocatalysts, has shed
around 13 percent in the last week, while palladium has dipped
nearly 10 percent.
The metals have been hit hard by the worsening outlook for the
automotive sector.
Spot platinum <XPT=> was at $1,564.00/1,584.00 an ounce
against its Monday close of $1,551.00/1,571.00. Spot palladium
<XPD=> ended a tad lower at $346.00/354.00 an ounce from
$349.50/357.50 late in New York on Monday.
Silver <XAG=> slid to $16.45/16.53 an ounce from $17.00/17.05,
its previous close in the U.S. market.
(Editing by Jim Marshall)
