LONDON (Reuters) - Gold firmed on Tuesday, benefiting from a softer dollar and a recovery in equities, with rising oil prices also boosting interest in the precious metal.
Spot gold rose to a session high of $755.00, before slipping back to $734.60/737.10 at 1424 GMT. Late in New York on Monday it was quoted at $729.60 an ounce.
Current moves in the gold market are pretty much U.S. -dollar driven, said Commerzbank senior trader Michael Kempinski, adding that gold's fall during the market turmoil of recent weeks has tempered the metal's safe haven appeal.
"We see good physical demand below or around $700 an ounce," he said.
The dollar slipped against the euro after earlier hitting a 2-1/2 year high versus the single currency, as risk aversion eased.
Traders are eyeing the two-day rate-setting meeting of the U.S. Federal Open Market Committee, which is expected to deliver a decision on Wednesday.
The Fed is expected to cut lending rates by half a percentage point to 1 percent, the lowest since June 2004, in a bid to calm turmoil in the financial markets.
"The U.S. dollar has broadly appreciated on the back of deleveraging in emerging markets and lower rate expectations elsewhere, with 50 basis points fully priced in for tomorrow's Fed rate decision," said analysts at Barclays Capital.
"There is some risk of a 75 basis point move as well, which could increase if the data are very weak," they added.
Wall Street stocks opened sharply higher, while European shares rose to break a five-day losing streak.
The recovery in equities is supporting gold, as investors are under less pressure to sell the precious metal to cover losses on the stock markets.
Oil prices also ticked higher, rising by more than $1 a barrel, tracking a rebound in stock markets. Firmer crude prices typically support gold, which is often bought as a hedge against oil-led inflation.
PLATINUM, PALLADIUM JUMP
Platinum rebounded, climbing by 6 percent to its session high of $821.50, as the softer dollar boosted interest in the precious metal.
The metal was pressured to five-year lows on Monday amid fears over falling demand from carmakers, who account for around half of annual platinum consumption.
Major platinum producer Aquarius Platinum Ltd (AQP.AX: Quote, Profile, Research, Stock Buzz) said in its first-quarter earnings report it has closed a shaft of its Marikana mine for care and maintenance against a backdrop of falling prices.
"This might help turn attention back onto supply-side issues," said Tom Kendall, precious metals strategist at Mitsubishi Corp. "Though undoubtedly (there is) more bad news to come from auto sector too in the weeks ahead."
Traders are also awaiting results from the world's number three platinum miner Lonmin (LMI.L: Quote, Profile, Research, Stock Buzz) later in the week.
Spot platinum was quoted at $794.50/814.50 an ounce, up from $772.50 in late New York trade on Monday. Palladium climbed 5 percent to a session high of $177.50 an ounce before being quoted at $177/187 an ounce at 1421 GMT, up from $167.50.
Spot silver dipped to $8.87/8.96 an ounce from $9.01. Holdings of the world's largest silver-backed exchange-traded fund, the iShares Silver Trust SLV.A, fell a further 1 pct on Monday and are down 144 tonnes week-on-week.
(Reporting by Jan Harvey; editing by Peter Blackburn)
