Gold steady as physical buying supports

The metal climbed to a one-week high in Asia, pulling other precious metals in its wake, but softened a touch in Europe as the dollar firmed against the euro and oil prices slipped from highs. Gold was at $810.10/811.10 an ounce at 0908 GMT against $810.70/811.90 an ounce late in New York on Tuesday, well above the nine-month low it touched on Friday.

"We have seen really heavy demand over the last two weeks on the physical side," said Commerzbank senior trader Michael Kempinski. "The bounce-back is on the back of this high physical demand."

Demand for certain finished products is so high that refiners are struggling to keep up, analysts say.

India, the world's largest gold market, is also likely to step up purchases ahead of a series of key religious festivals that culminate in October with Diwali, the Hindu festival of lights.

A slightly firmer tone to the dollar, which is regaining some ground against the euro on Wednesday morning after the previous session's fall, and steadier oil prices are weighing on gold.

Oil extended gains to $115 a barrel in early trade as the softer dollar rekindled buying interest in oil and other commodities, but have since slipped back to trade little changed from Monday's level.

Traders are eyeing U.S. weekly oil stockpile data due out at 1435 GMT for clues as to the future direction of the crude market, and consequently of gold.

"The consensus is for a build of crude oil inventories but a strong draw of gasoline stockpiles, which already had an impact on oil prices yesterday," said Dresdner Kleinwort consultant Peter Fertig.

"(If) the draw in gasoline inventories remains far below forecasts, crude oil might head towards the $110 a barrel mark, which would be bearish for gold," he added.

ETF holdings dip

The SPDR Gold Trust, the world's largest bullion-backed exchange-traded fund, said it recorded its first outflow in two weeks on Aug. 19, as its gold holdings dipped 1 percent.

ETFs issue securities backed by physical commodities, and buying by the funds has represented a major source of demand in recent years. Analysts fear a sell-off of ETFs' gold holdings could knock spot prices lower.

Among other precious metals, spot silver was little changed at $13.15/13.20 from $13.15/13.21 in late New York trade on Tuesday.

Spot platinum dipped to $1,339.00/1,359.00 an ounce from $1,344.50/1,364.50 an ounce late in New York, having fallen to its weakest since last September of $1,296.50 on Tuesday.

Interest in the metal remains muted by the murky outlook for carmakers, who consume over half of the world's platinum each year. "The metal should remain under pressure in the medium term," said Standard Bank analyst Manqoba Madinane.

Spot palladium gained to $282.00/288.00 an ounce from $280.00/288.00 an ounce.