May 7 (Bloomberg) -- Gold fell in London as the dollar rose against the euro, diminishing the metal's appeal as a hedge against declines in the U.S. currency. Platinum also slipped.

Gold has moved in the opposite direction to the dollar this year, with the metal up 4 percent and the currency down 6 percent against the euro. The dollar climbed as Federal Reserve Bank of Kansas City President Thomas Hoenig said ``serious'' inflation pressure may lead the Fed to increase interest rates.

``We might see some dollar strength holding, which would put precious metals under pressure,'' said Walter de Wet, head of commodities research at Standard Bank Group Ltd. in Johannesburg.

Gold for immediate delivery fell $5.87, or 0.7 percent, to $870.53 an ounce as of 12:51 p.m. in London. Futures for June delivery dropped $5.90, or 0.7 percent, to $871.80 an ounce on the Comex division of the New York Mercantile Exchange.

The London morning gold ``fixing'' price used by some mining companies fell 0.7 percent to $874 an ounce from $880 at the previous afternoon fixing.

Silver fell 16.5 cents, or 1 percent, to $16.695. Platinum fell $18.50, or 0.9 percent, to $1,939.50 and palladium fell $8, or 1.9 percent, to $423.50 an ounce.

StreetTracks Gold Trust, the biggest exchange-traded fund backed by bullion, raised its holdings by 3.99 metric tons to 584.44 tons on May 6, according to figures on the company's Web site. The increase is the first purchase of gold since March 27.

To contact the reporter on this story: Rachel Graham in London at rgraham13@bloomberg.net

Last Updated: May 7, 2008 08:11 EDT