Gold hits one-week low on dollar; physical buyers emerge

LONDON (Reuters) - Gold fell to its lowest in a week in Europe on Wednesday as the U.S. dollar held gains against other currencies, but jewelers and other physical buyers resurfaced in Asia and the Middle East.

Spot gold hit a low of $859.30 an ounce, its lowest level since May 5, before bouncing to $862.85/863.85 an ounce, still down from $866.55/867.95 late in New York on Tuesday.

In other precious metals, platinum briefly dipped below $2,000 an ounce before rebounding on bargain hunting.

"The physical activity is quite good. It's not as good as it was a couple of weeks ago, but it's still reasonable," said Frederic Panizzutti, metals analyst at MKS Finance, referring to physical demand in Asia and the Middle East. = "We see, generally speaking, only little buying interest from Europe for either physical or non-physical. We expect the market to get back to gold and push it higher but you need to consolidate somewhere between $850 and $950."

Gold has lost more than 16 percent in value since spiking to a lifetime high of $1,030.80 an ounce on March 17, mostly driven by profit-taking and the dollar's recovery.

The dollar firmed on Wednesday, building on gains made after robust U.S. retail data, with attention turning to inflation figures that could heighten chances of a pause in the Federal Reserve's rate cut campaign.

In the physical market in Asia, dealers noted buying from Indonesia and Vietnam but demand from India, the world's largest consumer, slowed down after the end of the busy festival season.

Premiums for gold bars were steady at 80 U.S. cents an ounce against the spot London prices in Singapore.

The most active June gold futures contract on the COMEX division of the New York Mercantile Exchange fell $5.7 to $863.9 an ounce.

Investors are awaiting the U.S. consumer price index for April due at 1230 GMT for further clues on whether the Fed will pause in cutting interest rates at its next policy meeting in June. "We still favor further downside in gold, silver and palladium as a combination of dollar strength, and profit-taking should weigh on these metals," UBS Investment Bank said in a client note.

"If platinum is dragged along for the ride, we will look to buy this metal first and hold our recommendation to add to long positions in platinum scale down below $1,900 an ounce."

Spot platinum hit an intraday low of $1,997 an ounce, but then rebounded to $2,024.50/2,044.50 an ounce. It was still down from $2,037.50 late in New York and well below a record high of $2,290 an ounce hit on March 4.

Palladium was $430/438 an ounce, barely changed from $430.50/438.50 in late New York, having earlier hit a low of $422 an ounce. Silver edged up to $16.71/16.76 an ounce from $16.66/16.72 in New York.

(Editing by Editing by Peter Blackburn)