http://www.reuters.com/article/hotSt...

Tue Sep 9, 2008 8:50pm EDT

Gold pares losses as oil bounces, near 11-month lows

SINGAPORE (Reuters) - Gold sank to its weakest in nearly a year on Wednesday as a stronger dollar and plunges in oil prices triggered heavy follow-up selling after the metal fell sharply the previous day.

Speculators have ditched some of their gold holdings and shifted their money back to currencies following recent gains in the dollar, which reduced bullion's appeal as an alternative investment. Other precious metals tracked gold lower.

Spot gold hit an intraday low of $762.55 an ounce, its lowest level since late October 2007, down 1.7 percent from $775.80/777.80 in late New York on Tuesday. It later bounced to $765.20/766.20 an ounce.

"Selling pressure intensified especially after breaking below this year's low reached in August," said Tatsuo Kageyama, an analyst at Kanetsu Asset Management in Tokyo.

"Crude oil's plunge and the strength of the dollar are putting a lot of selling pressure in gold. As long as crude prices are falling, investors will continue liquidating their positions in gold."

Falling oil prices also spurred selling as it reduced gold's appeal as a hedge against inflation. U.S. crude oil futures fell more than $1 after Tuesday's settlement to $102.06 a barrel, the lowest crude oil price since early April.

The benchmark gold contract on the Tokyo Commodity Exchange, August 2009 JAUc6, fell 133 yen per gram to 2,650 yen per gram.

Gold futures for December delivery on the COMEX division of the New York Mercantile Exchange lost $22.7 to $769.40 an ounce.

Precious metals prices at 0038 GMT

Metal Last Change Pct chg YTD pct chg Turnover

Spot Gold 765.55 -11.20 -1.44 -8.06

Spot Silver 11.05 -0.20 -1.78 -25.19

Spot Platinum 1216.50 -13.50 -1.10 -19.97

Spot Palladium 226.00 -4.00 -1.74 -38.59

TOCOM Gold 2648.00 -135.00 -4.85 -13.46 17854

TOCOM Platinum 4162.00 -282.00 -6.35 -22.05 9639

TOCOM Silver 383.70 -30.00 -7.25 -29.08 415

TOCOM Palladium 790.00 -90.00 -10.23 -41.52 981

Euro/Dollar 1.4105

Dollar/Yen 106.97

TOCOM prices in yen per gram, except TOCOM silver which is priced in yen per 10 grams. Spot prices in $ per ounce.

(Reporting by Lewa Pardomuan and Chikafumi Hodo; Editing by Louise Heavens)