UPDATE 5-Gold recovers as oil climbs, dollar retreats

* Euro recovers from six-month low vs dollar after weak data

* Oil ticks up more than $2 a barrel on tropical storm fears * Market awaits U.S. data

(Updates prices, adds detail, comment)

By Jan Harvey

LONDON, Aug 26 (Reuters) - Gold recovered in Europe on Tuesday as rising oil prices lifted the precious metal from earlier lows, and as the dollar slipped from a six-month high against the euro.

Gold XAU= climbed back up to $823.50/824.50 an ounce at 1346 GMT from $820.20/821.40 an ounce late in New York on Monday.

"Everything is being led by external factors (such as oil and currencies)," said VM Group analyst Matthew Turner.

Crude oil prices swung back into the black after earlier losses to gain more than $2 a barrel, supporting buying of gold as a hedge against oil-led inflation.

Prices rose as fears grew that tropical storm Gustav could turn disrupt output in the Gulf of Mexico, seat of a swathe of key U.S. oil installations. [ID:nN26455991]

The rise in oil pulled gold up from its earlier low of $806.70, hit after the euro fell over a cent to a six-month low below $1.46.

The single currency slipped after the German Ifo business confidence index slumped to its lowest in three years, fanning speculation a euro zone rate cut may be in the offing. [ID:nLQ163254]

"We saw a very sharp move this morning in favour of the dollar, which has accelerated what has been a recent trend in dollar strength against the euro," Fairfax analyst John Meyer said.

A stronger dollar against the euro typically pressures gold, as the metal is often bought as a hedge against weakness in the U.S. currency.

The dollar later gave up some of those gains, allowing gold to track oil prices higher.

The precious metal has also taken support in recent sessions from an upsurge in physical demand for jewellery, coins and bars. While this is unlikely to counteract the effects of the strengthening dollar, it is providing some support.

Demand is expected to pick up in the world's biggest gold market, India, ahead of the Hindi festival of Diwali in October.