* Gold slips to two-week low as oil slides, equities rally
* Dollar extends gains against the euro
* Platinum group metals decline amid poor demand outlook
(Recasts, updates throughout, changes dateline, pvs
SINGAPORE)
By Jan Harvey
LONDON, July 23 (Reuters) - Gold slid to a two-week low as
oil prices declined, denting the precious metal's appeal as an
inflation hedge, and as the dollar extended Tuesday's gains
against the euro.
The platinum group metals also posted sharp losses, with
platinum slipping to its lowest level since early February and
palladium sliding 5 percent, in sympathy with gold and on
reports carmaker Toyota may cut its sales target this year.
Gold <XAU=> dropped to $932.20/933.20 an ounce at 1007 GMT
from $948.30/949.90 late in New York on Tuesday, having hit an
intraday low of $932.00 -- its lowest level since July 10.
The precious metal slipped sharply on Tuesday as the dollar
rallied after Philadelphia Federal Reserve President Charles
Plosser said the Fed may have to start raising rates to combat
inflation. []
Gold typically moves in the opposite direction to the U.S.
currency, as it is bought as a hedge against dollar weakness.
"The comments by Plosser certainly set the tone for the rest
of the week," Merrill Lynch analyst Daniel Hynes said. "The US
dollar reacted quite quickly to those, and as a consequence gold
has been sold off."
"The pull-back in the oil price has been a key factor over
the last few days," he added. "That market has turned a lot more
bearish, so people are more comfortable with the inflation
outlook."
Crude prices slipped more than $2 a barrel on Wednesday as
concerns eased that Hurricane Dolly would hit oil installations
in the Gulf of Mexico. []
STOCKS RALLY
Meanwhile equities are rallying, with European shares up 2
percent and world stocks hitting a three-week peak, as the lower
oil price boosted interest in the stock markets. []
"A fall in crude oil prices could see investors increase
equity market exposure, raising precious metals' downside
potential today," Standard Bank analyst Manqoba Madinane said.
"Investment sentiment in the commodity complex might be
cautious throughout today."
Investor interest in gold seemed to be softening, with the
amount of gold held to back the SPDR Gold Trust in New York --
the world's biggest gold-backed exchange-traded fund -- falling
2 percent to 690.26 tonnes on Tuesday.
Holdings previously had been close to a record.
[]
Among other precious metals, spot silver tracked gold lower
to $17.52/17.57 an ounce from $18.00/18.08 late in New York on
Tuesday.
The platinum group metals dipped sharply, with palladium
down nearly 5 percent at its session low and platinum falling
more than 2 percent amid market talk that Japanese carmaker
Toyota was cutting its full-year sales targets. []
The reports suggest "a weakening auto market, and
consequently less demand from the auto-catalyst market," said
Fairfax metals analyst John Mayer.
Carmakers are major buyers of both platinum and palladium,
which are used in catalytic converters.
Platinum prices in particular have slipped sharply over the
last 10 days, which the noble metal currently trading some 23
percent below its March peak of $2,290 an ounce.
However, with output from major producer South Africa --
supplier of 80 percent of the world's platinum -- still
constrained by a power shortage, analysts say the market remains
firmly underpinnned, and should not fall too much further.
Platinum "looks increasingly good value at current levels",
according to Mitsubishi analyst Tom Kendall.
Spot platinum <XPT=> touched a session low of $1,754.00 an
ounce, its weakest level since February 1, before recovering to
trade at $1,757.00/1,777.00 against $1,800.50/1,820.50 an ounce
in New York.
Spot palladium <XPD=> dropped to $386.50/394.50 an ounce
from $405.50/413.50 late in New York, having earlier touched an
intraday low of $385.00.
(Reporting by Jan Harvey; Editing by Michael Roddy)
