LONDON, Oct 27: Gold slipped more than 3 per cent in Europe on Monday as the surging dollar dented the precious metal’s appeal as an inflation hedge, and as weakness on the equity markets prompted selling of gold to meet margin calls.

Other precious metals such as silver and platinum were caught up in the sell-off, with platinum sliding nearly 6 per cent as traders worried over the demand outlook for the metal used in catalytic converters.

Spot gold was at $715.70/718.20 an ounce at 1013 GMT, down from $733.30 an ounce in New York late on Friday. Earlier it touched a session low of $706.10.

The dollar is part of the fall, and another component is fund selling, Standard Bank analyst Manqoba Madinane said.

There is just a general fear in the market. No-one knows where the floor is. The ongoing selling (of equities) will affect gold on the basis that funds need to get money out of the market, he added.

That will be negative for gold. The market slipped as the stronger dollar dented gold’s appeal as an alternative investment to the currency.

The dollar hit a two-year high against the euro as risk-averse investors piled into the US currency and the yen.

Gold is under pressure as funds liquidate their bullion holdings to cover losses on other markets.

Good demand for gold jewellery was seen over the weekend in India, the world’s largest gold market, due to the Dhanteras festival on Sunday.

However, sales are expected to slow after Diwali on Tuesday, traders said.

Among other precious metals, platinum tumbled almost 7 per cent to a session low of $732.50 as the firmer dollar added to fears over weakening demand from carmakers, who account for around half of global platinum consumption.

Spot platinum later recovered to trade at $743.50/773.50 an ounce against $788.50 in New York late on Friday.

Its sister metal palladium edged down to $163.50/173.50 an ounce from $167.

Silver tumbled in line with gold, shedding more than 6 per cent to its session low of $8.70 an ounce, before recovering to trade at $8.81/8.91 against $9.30 an ounce.—Reuters