European gold pares losses on bargain hunting

Gold pared early losses on Wednesday to rise back above $800 an ounce, on strong physical buying by jewellers lured by recent price falls. Early on Wednesday, gold had dropped to a two-week low of $789.05 an ounce due to a strong dollar and weak oil prices, before bouncing back to $803.00/804.20 an ounce at 1405 GMT from $804.90/$806.25 in late New York trade on Tuesday.
"Anytime the price goes below $800 an ounce it rekindles physical interest from jewellers and other buyers," said Calyon analyst Robin Bhar. "Consumers see these levels as very attractive, so I don't think these support levels should be seriously violated unless the dollar continues to strengthen significantly."
Strength in the dollar and a drop in oil prices has dampened the appeal of gold for investors, with the precious metal falling from almost $980 an ounce back in mid-July. With the dollar soaring to an 8-month high against the euro on Wednesday and oil prices falling towards $108 a barrel, the metal's appeal as an alternative to the US currency and as a hedge against fuel-led inflation has been diminished.
Lower prices have attracted buying before the festive season in main consumer India, where gold imports in August jumped 45 percent from a year ago. Key markets Turkey and Dubai have also reported strong sales in August. Analysts said the drop in gold prices has released a surge of pent-up buying which was thwarted by record prices earlier in the year.
Spot platinum consolidated at $1,394.50/1,414.00 an ounce, having traded at $1,392.00/1,412.00 late in New York on Tuesday. Worries about falling demand for autocatalysts, a slowing US economy and profit-taking have dragged down platinum by around 40 percent from its record high of $2,290 an ounce back in March. Autocatalysts, used to clean exhaust fumes, account for more than 50 percent of global demand.
Automakers may post a 10th consecutive month of US sales declines on Wednesday as incentives on slow-selling trucks and SUVs and General Motors Corp's employee pricing promotion failed to ignite demand from consumers in August. Platinum's sister metal palladium eased to $282.00/290.00 an ounce from $285.50/293.50. Silver dropped to $12.82/12.90 an ounce from $13.04/13.10.