LONDON, Sept 5: Gold eased on Friday as a strong dollar and weaker oil prices pinned the metal under $800 an ounce, although strong physical buying supported prices.

Gold also was pressured by rising risk aversion, which pushed world stocks to their lowest in more than two years as fears about the slowing global economy intensified.

The dollar has benefited from investors fleeing risk outside of the United States, unwinding positions and moving money back into dollars, said Lehman Brother’s analyst Michael Widmer.

Rising risk aversion would generally be bullish for gold, but the dollar seems to have been the main driver for so many commodities lately.

Gold slipped to a low of $790.35 in Asian trade, before recovering slightly to $794.95/795.95 an ounce by 0954 GMT from $796.15/797.75 late in New York on Thursday.

Gold is often bought as an alternative asset to the dollar when the US currency is weak.

Gold’s role as a hedge against inflation concerns has been diminished as a result, with a near $2 a barrel drop in oil prices on Friday adding further downward pressure on the metal.

It could take a while before the market can fully restore their confidence to shift back their positions into commodities, Kageyama said.

Physical buying in India and the Middle East has kept gold prices supported near $800 an ounce, with demand thwarted earlier in the year by gold’s rise above $1,000 an ounce.

Platinum dropped as concerns over demand for autocatalysts due to news of poor car sales in the United States prompted investment funds to sell.

Spot platinum fell to $1,360.00/1,380.00 an ounce from $1,391.50/1,411.50.

The US has seen 10 straight months of declining car sales the longest such downturn since the 2001 recession.

Autocatalysts, used to clean exhaust fumes, account for more than half of global platinum use.

Platinum’s sister metal palladium eased to $275.00/283.00 from $281.50/289.50, while silver was almost unchanged at $12.72/12.77 from $12.74/12.80 an ounce.—Reuters