* Gold climbs on safe haven buying, rising oil
* Iran missile test-fire supports gold, crude
* Platinum recovers from two-month low
(Updates prices and comments)
By Jan Harvey
LONDON, July 9 (Reuters) - Gold firmed in Europe on
Wednesday as reports Iran had test-fired missiles lifted oil
prices and prompted buying of bullion as a safe haven.
Gold <XAU=> rose to $923.70/924.70 at 1507 GMT from
$921.35/922.55 an ounce late in New York on Tuesday, when the
precious metal shed 1 percent to a near two-week low of $912.50
as oil prices dropped.
"The prices are holding up because of a risk premium
generated by the tensions in the Middle East," said commodity
analyst Manqoba Madinane at Standard Bank in Johannesbourg.
"Oil prices have increased from yesterday's levels and
that's also supporting the upside on gold," he said.
Iran test-fired nine missiles on Wednesday and warned the
United States and Israel it was ready to retaliate for any
attack over its disputed nuclear projects.[]
Oil rose $2 to around $138 a barrel, after Iran said it had
test-fired missiles that could reach Israel and U.S. bases in
the region.[]
Rising oil prices increase gold's appeal as an inflation
hedge and boost sentiment towards commodities as an asset class
while rising tension in the Middle East allures safe-haven
buying.
"Gold benefits directly from geopolitical tension, so it
would have received support from that news," said Merrill Lynch
metals strategist Daniel Hynes.
The U.S. dollar weakened, as oil prices rebounded and
geopolitical tensions resurfaced with news Iran test-fired
missiles and unknown gunmen attacked the U.S. consulate in
Turkey.[]
A lower dollar tends to benefit the precious metal, which is
often bought as a hedge against currency weakness and so moves
in the opposite direction to the greenback.
U.S. crude stocks, a data closely watched by the market,
fell more than expected last week on lower imports, but a
surprise rise in the gasoline stocks offset the bullish news.
[]
FINANCIAL WEAKNESS
The precious metal has had a poor start to the week, trading
more than 2 percent lower at its weakest point as the dollar has
ticked up and oil prices have dropped.
However, fears over inflation and financial market
instability are supporting gold.
"The metal is under pressure from the recent firming in the
U.S. dollar and crude's two-day decline, but supported by
concerns about financial market weakness, inflation and the
ongoing effects of the credit crunch," said UBS analyst John
Reade in a note.
"With the market pretty long, we favour the downside,
although any rebound in EUR/USD or crude oil could see the metal
gain further ground," he added.
Among other precious metals, spot platinum <XPT=> firmed to
$1,952.50/1,972.50 an ounce from $1,940.50/1,960.00 late in New
York. It hit a two-month low of $1,936.50 on Tuesday on fears a
slowing U.S. economy could weaken demand from car makers.
Spot palladium <XPD=> was unchanged at $437.50/445.50
against $437.50/445.50 on Tuesday.
"(Palladium) price movements correlate to platinum, although
long term fundamentals are substantially weaker," noted Marc
Elliott, an analyst at investment bank Fairfax.
Spot silver <XAG=> was slightly higher at $17.95/18.00 from
$17.82/17.88.
(Additional reporting by Humeyra Pamuk, editing by Peter
Blackburn)
