LONDON, July 23: Gold slid to a two-week low as oil prices declined, denting the precious metal's appeal as an inflation hedge, and as the dollar extended Tuesday's gains against the euro.

The platinum group metals also posted sharp losses, with platinum slipping to its lowest level since early February and palladium sliding 5 per cent, in sympathy with gold and on reports carmaker Toyota may cut its sales target this year.

Gold dropped to $932.20/933.20 an ounce at 1007 GMT from $948.30/949.90 late in New York on Tuesday, having hit an intraday low of $932.00 -- its lowest level since July 10.

The precious metal slipped sharply on Tuesday as the dollar rallied after Philadelphia Federal Reserve President Charles Plosser said the Fed may have to start raising rates to combat inflation.

Gold typically moves in the opposite direction to the US currency, as it is bought as a hedge against dollar weakness.

The comments by Plosser certainly set the tone for the rest of the week, Merrill Lynch analyst Daniel Hynes said. The US dollar reacted quite quickly to those, and as a consequence gold has been sold off.

The pull-back in the oil price has been a key factor over the last few days, he added. That market has turned a lot more bearish, so people are more comfortable with the inflation outlook.

Crude prices slipped more than $2 a barrel on Wednesday as concerns eased that Hurricane Dolly would hit oil installations in the Gulf of Mexico.

Meanwhile equities are rallying, with European shares up 2 per cent and world stocks hitting a three-week peak, as the lower oil price boosted interest in the stock markets.

Among other precious metals, spot silver tracked gold lower to $17.52/17.57 an ounce from $18.00/18.08 late in New York on Tuesday.

The platinum group metals dipped sharply, with palladium down nearly 5 per cent at its session low and platinum falling more than 2 per cent amid market talk that Japanese carmaker Toyota was cutting its full-year sales targets.

The reports suggest a weakening auto market, and consequently less demand from the auto-catalyst market, said Fairfax metals analyst John Mayer.

Carmakers are major buyers of both platinum and palladium, which are used in catalytic converters. Platinum prices in particular have slipped sharply over the last 10 days, which the noble metal currently trading some 23 per cent below its March peak of $2,290 an ounce.—Reuters