UPDATE 6-Gold climbs as dollar slides, oil jumps

* Gold climbs as dollar wilts versus euro

* Oil prices rally more than $7 a barrel

* Silver, platinum also post gains

(Updates with quotes, closing prices, market activity)

By Jan Harvey

LONDON, Sept 19 (Reuters) - Gold rose almost 2 percent on Friday, recovering from earlier losses, as the dollar slipped sharply versus the euro and oil rallied more than $7 a barrel.

Gold slipped more than 3 percent earlier in the session after the U.S. government said pledged $50 billion to guarantee money-market mutual funds, curbed short-selling and crafted a sweeping plan to mop up toxic mortgage debt, sending global stock markets soaring. [ID:nN19322167]

However, a turnaround in the foreign exchange markets that sent the euro to session highs against the dollar, coupled with a sharp rise in the oil price, helped the metal rally to a day high of $868.65 per ounce.

At New York's last quote of 2:25 p.m. EDT (1825 GMT), spot gold XAU= was at $862.20/866.20, against $847.25 an ounce at the nominal New York close on Thursday.

The euro EUR= gained ground against the dollar and crude prices rallied as investors digested the implications of a mooted U.S. government plan to deal with toxic bank assets.

A weaker dollar typically benefits gold, which is often bought as a currency hedge.

"The impact of the plan has been for the dollar to weaken, and essentially that has been the catalyst for a move up in all markets," said Calyon analyst Robin Bhar.

"Equities are exploding, base metals are higher and gold as well has taken part."

Sharply higher global markets also prompted investors to switch funds to the equities from the commodity sector.

Leonard Kaplan, president of Prospector Asset Management, said that while the U.S. government bailout plan was highly inflationary, it would take gold traders time to sift through the potential implications of the various proposals.

U.S. gold contract for December delivery GCZ8 settled down $32.30, or 3.6 percent, at $864.70 an ounce on the COMEX division of the New York Mercantile Exchange.