LONDON, Sept 24: Gold was softer in Europe on Wednesday as risk appetite improved, but came off early lows as the dollar weakened against the euro and oil prices rose.

Spot gold edged down to $888.10/890.10 an ounce against $890.70 at the nominal New York close on Tuesday.

The precious metal came under pressure from fresh optimism over the health of the financial sector on news that Warren Buffett is investing $5 billion in Goldman Sachs.

A recovery in risk appetite is likely to curb interest in gold, which has benefited from safe-haven buying amid volatility in the equity markets and worries over the outlook for the financial sector -- especially debt-burdened banks.

The situation (in the financial markets) is calming down a little bit, Deutsche Bank metals trader Michael Blumenroth said. This time last week people were very nervous.

The Goldman news shows people are trusting banks again, and are willing to invest in banks again, he added.

The euro rose after the German Ifo business confidence indicator came in less weak than expected, and on uncertainty over the effectiveness of the US government’s proposed $700 million plan to shore up the financial system.

The other main external driver of gold, crude oil, is also trending higher, adding more than $1 a barrel as forecasts for a drop in US crude stocks more than outweighed worries over the government’s financial rescue plan.

The trust’s holdings have risen by more than 100 tons since Lehman Brothers announced it was seeking bankruptcy protection on September 15.

Spot silver was at $13.29/13.37 against $13.21 at the nominal New York close on Tuesday.

Among other precious metals, platinum and palladium edged higher.

The two metals, which are primarily industrial in use, have not benefited from the same investment flows as gold and silver as a result of the financial crisis.

They have both suffered from the poor outlook for the automotive sector, a major user of the metals, analysts said.

Spot platinum was at $1,221.50/1,241.50 an ounce, up from $1,213 at the nominal New York close on Tuesday, while palladium was at $249.50/257.50 an ounce against $245.—Reuters