Gold slides as U.S. asset plan cheers investors

By Jan Harvey

LONDON (Reuters) - Gold slipped nearly 3 percent in Europe on Friday after the U.S. government announced it is considering a plan to deal with risky bank assets, which boosted the dollar and equities and restored risk appetite.

Gold's move reflected losses among other precious metals, with platinum falling more than 3 percent to a 2-1/2 year low and palladium shedding 4 percent. Silver was the only climber.

Spot gold was at $839.30/832.30 at 0945 GMT, down 1 percent from $847.25 at New York's nominal close on Thursday. Earlier it touched a session low of $823.80.

"The dollar's getting a bit stronger. There seems to be a little more confidence around," Standard Chartered metals analyst Daniel Smith said.

"The spike we saw in gold over the last couple of days just went too far, so we are seeing a bit of a counter-reaction to that," he added. "It is looking for a floor at the moment."

Gold has benefitted from a wave of risk aversion that has hit the markets this week after U.S. investment bank Lehman Brothers filed for bankruptcy protection on Monday.

Prices soared nearly $140 an ounce from last Friday's nominal New York close to this week's high, while Wednesday saw the largest one-day dollar gold price rise in history.

The metal rallied above $900 an ounce in late Thursday trade as investors fled rocky equity markets for safer assets such as bullion.