(Recasts with quotes, prices, changes dateline, pvs SINGAPORE)
By Karl Plume
LONDON, May 30 (Reuters) - Gold hit a two-week low on Friday
as the dollar firmed and as lower oil prices hurt the metal's
appeal as hedge against inflation.
Other precious metals also remained under pressure, with
spot platinum <XPT=> and palladium <XPD=> both setting
three-week lows and silver <XAG=> nearing a four-week trough.
Spot gold <XAU=> stood at $878.65/879.65 an ounce by 1004
GMT, against $877.85/879.25 late in New York on Thursday. It
earlier hit $870 an ounce, its lowest point since May 15.
The metal has fallen more than 6 percent this week.
"Gold is just treading water after yesterday's huge
decline," said Matthew Turner, commodities analyst with Virtual
Metals.
"It had a bad run over the past two days mainly on the oil
price. Secondly, gold failed last week to get up to its 2008
highs and some people may be disillusioned, wondering if it has
made its highs for the year already."
The euro hit a two-week low against the dollar after
surprisingly weak German retail sales figures added to the view
that the euro zone economy may be weakening.
The dollar rebounded broadly this week amid easing concerns
about the U.S. economy's outlook. Investors will look for
further clues to the health of the world's largest economy in
The University of Michigan confidence index and Chicago
purchasing managers index, which will be released later today.
A firmer dollar makes gold costlier for holders of other
currencies and often lowers bullion demand. The metal is also
generally seen as a hedge against oil-led inflation.
Oil fell towards $125 a barrel as a strong dollar
overshadowed the biggest drop in U.S. inventories since 2004,
while doubts over global energy demand persisted.
Physical demand for gold should improve after the recent
decline, which will help keep a floor under prices, analysts
said.
"The move below $900 an ounce is likely to be viewed
favourably by the physical sector, particularly in India as
post-festival re-stocking is carried out," TheBullionDesk.com
analyst James Moore said in a market note.
PLATINUM SEEN LEVELING
Platinum was down more than 10 percent from last week's
2-1/2-month high above $2,200 an ounce despite a continuing
power crisis in top producer South Africa.
The head of state-owned electricity utility Eskom, which
produces about 95 percent of South Africa's electricity, warned
on Thursday that a power shortage that has slowed growth would
go on for years. []
Spot platinum was last quoted at $1,980.50/2,000.50 an
ounce, down from $1,990.50/2,010.50 in late trade on Thursday.
Spot silver <XAG=> fell to $16.63/16.68 an ounce from
$16.86/16.92 late in New York, unmoved by a decision by Peru's
largest federation of mining unions to hold a nationwide strike
starting on June 16 after Congress delayed voting on a bill to
improve labour benefits.
Peru is the world's top silver producer and fifth largest
gold producer. []
Spot palladium slipped to $425/$430 an ounce from
427.50/435.50.
(Reporting by Karl Plume; editing by Christopher Johnson)
