* Dollar slides to 5-month low vs basket of currencies
* Oil firm near 6-month high above $61/bbl
(Updates throughout, changes dateline - pvs TOKYO)
By Jan Harvey
LONDON, May 22 (Reuters) - Gold held near two-month highs
above $950 an ounce in Europe on Friday, consolidating after the
previous session's near 2 percent rise, as investors bought the
metal as a hedge against the weak dollar and financial risk.
Prices edged off the highs reached earlier in the session as
some traders cashed in after this week's sharp gains, but remain
well positioned for a fresh push higher if dollar weakness
persists, analysts said.
Spot gold <XAU=> was bid at $950.40 an ounce at 0842 GMT,
against $953.40 an ounce late in New York on Thursday.
"The dollar is threatening to break through the $1.40 level
on the euro, and there are concerns about the economic
environment," said Calyon analyst Robin Bhar. Both boost buying
of bullion, he said. []
Asian stocks slipped overnight and the dollar fell to a 2009
low as fears grew that the United States could lose its triple-A
rating. Fears over the economic outlook and the health of the
financial system are fuelling interest in gold as a haven.
[]
Ratings agency Standard & Poor's cut its outlook on Great
Britain to negative from stable on Thursday, while Moody's
Investor Services said it was comfortable with its U.S. rating
but that it was not guaranteed forever. []
Bullion is also technically well-positioned to make further
gains, Bhar added, especially if the dollar softens further.
"We have closed for two days above the $935 level, so the
technical guys will be saying we now have confirmation of a
successful upside break," he said.
"We've seen in the past gold has put in some false starts
and never really achieved a clean break-out. If we close at
these sorts of levels, it will look really good on the weekly
charts, and provide even more upside potential."
Stronger oil prices, which are hovering around their
six-month peak, are also supporting gold. Bullion can be bought
as a hedge against oil-led inflation, while rising crude prices
can also boost interest in commodities as an asset class. []
LACKLUSTRE
Investor interest in gold-backed exchange-traded funds
remains relatively lacklustre. Holdings of the largest
gold-backed ETF, the SPDR Gold Trust <GLD>, were unchanged for a
sixth consecutive session on Thursday.
London's ETF Securities noted an outflow from their Physical
Gold ETF <PHAG.L>. Its holdings declined nearly 69,000 ounces or
2.5 percent on Thursday.
Among other precious metals, platinum <XPT=> was quoted at
$1,146 an ounce against $1,148.50 late in New York on Thursday,
while palladium <XPD=> was at $231.50 an ounce against $231.
Fellow platinum group metal rhodium dipped $50 to $1,400 an
ounce, giving up some of this week's earlier gains.
Spot silver <XAG=> was bid at $14.43 an ounce against
$14.51. The metal has tracked gains in gold in recent sessions,
and is up around 3.7 percent on the week at present.
"With gold running into profit-taking, there is the risk of
deeper correction for silver as the failure to breach the March
highs spark technical related selling," said James Moore, an
analyst at TheBullionDesk.com, in a note.
"However, we expect the metal to continue to benefit from
inflation fears and investor diversification, and think silver
is brewing for an upside push of its own, potentially targeting
the $16.40 level."
(Reporting by Jan Harvey; Editing by Peter Blackburn)
