LONDON, Aug 8 - Gold shifted up a gear in Europe on Friday morning as the market used signs of a settling euro/dollar range to flush out physical demand, but activity was still fairly subdued as the summer holiday season kicked in. Bullion shuffled higher in Asia overnight, with the dollar hovering above a two-week low against the yen, and further slight underlying support from uncertainty sparked by Thursday's truck bomb attack outside the Jordanian embassy in Baghdad. European players took the market up, despite the euro softening against the dollar slightly which would normally make the dollar denominated asset less of a buy for European investors. Traders took heart from the euro settling into a familiar range. "It looks like people are looking for stability to come in, which has appeared somewhat in the currencies -- the euro has stopped between $1.13-1/2 and $1.14 for the last day or so," one trader said. "We've seen a period of currency stability now because all talks of interest rate cuts have gone as they look like being on hold for the next six to nine months and that has encouraged physical buying," he added. Spot gold was quoted at $355.00/355.75 an ounce at 1032 GMT, compared with $352.50/353.25 quoted in New York late on Thursday. Gold has been casting for direction since pulling back from seven-week highs last week near $370 an ounce, with a massive long position on COMEX threatening to send prices plunging if it fails to hold the psychologically key $350 mark. But gold equities have performed well and the market has taken some encouragement from a continued reduction of hedging, which involves selling yet-to-be-mined nuggets at a preset price. The tactic protects miners when prices fall, but can backfire badly when they rise. Gold hedging by 88 producers accounting for 67 percent of global output fell by 5.0 million ounces to total 73.2 million ounces in the second quarter of 2003, according to a N.M. Rothschild-sponsored report released on Thursday. The Gold Hedging Indicator, produced by Haliburton Mineral Services and Virtual Metals Research, said the reduction in the gold industry's hedging activities showed little sign of coming to an end. Analysts, who had cited de-hedging as a major support for the gold market, said that producer buy-backs could continue to feature. "The latest bid by AngloGold for Ashanti, for example, and the declaration that in the event of a successful merger Ashanti's hedge book would be reduced suggests de-hedging will be with us for the foreseeable future," said HSBC metals analyst Alan Williamson. In the currency market, the euro was slightly weaker at $1.1349/53 versus $1.1376. Fluctuations in exchange rates can affect dollar-based bullion prices by increasing or diminishing the buying power of players using currencies other than the greenback. Spot silver gained three cents to $5.05/07 an ounce, with analysts reporting a knock-on effect from gold's rise, although the longer-term prognosis was still seen as weak, due to poor overall demand. "It is becoming clear that earlier reports of the death of the silver rally have been greatly exaggerated, and although over the medium-term we believe that prices will head lower, further short-term gains cannot be ruled out," Williamson said. Spot platinum was steady at $677.00/682.00 an ounce. Palladium was at $174.00/179.00, compared with $174.50/180.50 quoted late Thursday in New York.