May 31, 2008	Saturday	Jamadi-ul-Awwal 25, 1429

LONDON, May 30: 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 and palladium both setting three-week lows and silver nearing a four-week trough.

Spot gold 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 per cent this week.

Gold is just treading water after yesterday’s huge decline, said Matthew Turner, commodities analyst with Virtual Metals.

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 US 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.

Platinum was down more than 10 per cent 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 per cent 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 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.—Reuters