* Gold slides more than 2 pct as dollar hits two-week high
* Oil slips below $126, grains, base metals fall
* Platinum group metals languish amid poor demand outlook
(Updates prices, adds comment)
By Jan Harvey
LONDON, July 23 (Reuters) - Gold fell more than 2 percent on
Wednesday as the dollar climbed to its firmest level since July
10 against the euro, denting the precious metal's appeal as a
currency hedge.
Oil prices fell below $126 a barrel, helping to soothe some
of the inflation fears that have supported gold, while other
commodities such as grains and base metals also slipped.
Gold <XAU=> dropped to $923.70/924.70 an ounce at 1450 GMT
from $948.30/949.90 late in New York on Tuesday, having hit an
intraday low of $921.80 -- its lowest level since July 9.
HSBC analyst James Steel said a combination of weaker oil
prices, declines in other commodities, an improvement in the
credit market and the belief that the Fed may be focusing more
on inflation are all conspiring to push gold lower.
"Gold has four major things hitting it today so I would be
very suprised, given the way other commodities and financial
markets are moving, if gold wasn't down," he said.
The dollar rallied to a two-week high against the euro,
supported by a slide in the oil price and a recovery in risk
appetite. A stronger greenback tends to pressure gold, which is
often bought as an alternative investment to the currency.
[]
Crude prices were also lower, giving up more than $2 a
barrel trade at $126.05 a barrel at 1451 GMT, as concerns eased
that Hurricane Dolly would hit oil installations in the Gulf of
Mexico, and after a rise in U.S. gasoline stocks.
[], []
Gold usually moves in the same direction as crude, as it is
often bought as a hedge against oil-led inflation.
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.
[]
PGMs DECLINE
The platinum group metals also posted sharp losses, with
platinum sliding to a 5-1/2 month low and palladium slumping
more than 5 percent, in sympathy with gold and amid fears over
demand from car manufacturers.
The precious metal is widely used by the car industry in
catalytic converters. []
General Motors <GM.N> said on Wednesday that its global
sales fell 5 percent in the second quarter, hurt by a 20 percent
decline in North America. []
An earlier report said carmaker Toyota <7203.T> may cut its
sales target this year. []
The reports suggest "a weakening auto market, and
consequently less demand from the auto-catalyst market," said
Fairfax metals analyst John Mayer.
Platinum prices in particular have slipped sharply over the
last 10 days, which the noble metal currently trading nearly 25
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 $1,730.00 an
ounce, its weakest level since February 1, before recovering to
trade at $1,733.00/1,753.00 against $1,800.50/1,820.50 an ounce
in New York.
Spot palladium <XPD=> dropped to $380.00/388.00 an ounce
from $405.50/413.50 late in New York, having earlier touched an
intraday low of $377.50.
Among other precious metals, spot silver tracked gold lower
to $17.54/17.59 an ounce, against $18.00/18.08 late in New York
on Tuesday.
(Reporting by Jan Harvey; Editing by Michael Roddy)
