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Gold gains on oil and dlr, eyes U.S. data

LONDON - Gold rose on the back of a soft dollar and firmer oil prices on Friday, hovering near its highest level in more than two weeks, with investors expecting U.S. economic data to shed more light on the world economy.

"Gold is tracking oil higher ... but this afternoon will be interesting as the United States is on holiday on Monday and volumes will be thin so it could be a very volatile session," said Mitsubishi analyst Tom Kendall.

Gold firmed to $836.75/837.75 an ounce by 0954 GMT from $831.45/832.65 late in New York on Thursday.

Gold jumped to $844.00 an ounce in the previous session, its highest level since August 11.

The dollar slipped against a basket of currencies on profit-taking and after oil rose to $116.71 a barrel on worries about possible supply disruptions caused by Tropical Storm Gustav.

"As long as Gustav keeps heading towards the Gulf of Mexico gold will be supported and might even rise above $840," said Kendall.

Gold has bounced as much as 9 percent since tumbling to nine-month lows around $773 two weeks ago, on high oil prices and demand from jewellers in Asia and other parts of the world. But gold is well below a record high of $1,030.80 hit in March. "Market sentiment could remain subdued as investors search for further clues on the U.S. dollar," said Manqoba Madinane at Standard Bank in a research note.

U.S. Chicago Purchasing Management Index is due at 1345 GMT and the Reuters/Michigan sentiment data lands at 1355 GMT.

"Also, the public holiday in the U.S. on Monday might see investors consolidate positions," Madinane said.

Strong demand from India

With gold prices trading 20 percent below an all-time high, physical demand was seen supporting the market.

"I've noticed that Indian housewives are far better forecasters of the gold price than most of us paid to do the job -- and,today, Indian housewives are buying the yellow metal," said Jeffrey Nichols of American Precious Metals Advisors.

"Fortuitously, physical demand has picked up sharply in the past month, particularly among retail investors. We've seen this in India where jewellery demand has picked up early in response to low prices ahead of the coming festival season."

Spot platinum fell to $1,467.50/1,487.50 an ounce from $1,469.00/1,489.00 late in New York on Thursday.

Platinum, which plummeted to 11-month lows around $1,296 last week, has suffered from expectations car demand will slow as the global economy falters, cutting demand for autocatalysts.

Spot palladium rose to $297.00/305.00 an ounce from $289.00/297.00 an ounce. Silver firmed to $13.81/13.86 an ounce from $13.64/13.70.