(recasts, adds quotes, changes prices, pvs SINGAPORE)
By Atul Prakash
LONDON, May 28 (Reuters) - Gold extended losses to trade
below $900 an ounce on Wednesday, as a sharp decline in oil
prices lowered the metal's appeal as a hedge against inflation.
Other precious metals followed gold, with platinum slipping
more than 3 percent, silver falling 1.8 percent and palladium
dropping around 1 percent in a broad commodities sell-off.
Gold <XAU=> fell about 2 percent to a two-week low of
$889.35 am ounce and was quoted at $893.70/894.70 at 1007 GMT,
against $907.10/908.30 in New York late on Tuesday, when if fell
about 2 percent.
"Whenever we get a weaker dollar and stronger oil, it's
fantastic for gold and the reverse is playing out now," said
Nick Moore, global commodity analyst with ABN AMRO.
"It's a general commodity sell-off that we're seeing which
has embraced not only oil but also industrial metals and
precious metals. This pullback is good for gold. This is a
chance for them (physical buyers) before gold has its next run."
Oil fell more than $2 a barrel, extending a slide from the
previous session amid growing signs Asian demand could start to
falter as consumer nations look to cut subsidies by raising
local fuel prices.
Bullion investors also watched the dollar and awaited the
release of U.S. durable goods figures for April at 1230 GMT. The
currency steadied after dipping against a basket of currencies.
Gold often moves in the opposite direction of the dollar.
"With the most of the recent gains in gold coming largely
from the rally in crude oil, it is obvious that as crude
retraces back, gold would reflect that too," Pradeep Unni,
analyst at Vision Commodities said in a market note.
BROAD SELL-OFF
In other bullion markets, U.S. gold futures for June
delivery <GCM8> fell $14.40 to $893.50 an ounce.
China, the world's second-largest gold producer last year,
is expected to surpass South Africa and become the world's top
producer in 2008 as it raises output from 270.5 tonnes to 300
tonnes this year.[]
In other precious metals, spot platinum <XPT=> fell to a
two-week low $2,035.50/2,055.50 an ounce from $2,118/2,138 late
in New York on Tuesday.
Platinum futures in Japan also declined sharply, with the
most active April contract <0#JPL:> falling a daily-limit of 300
yen and settling at the day's low of 6,740 yen.
The metal's major industrial use is in catalysts,
particularly in diesel catalysis, to help clean environmentally
damaging fumes from motor exhausts.
"We still expect dips to be viewed as buying opportunities,
given the tight market fundamentals and likelihood of further
investment demand/supply disruptions," James Moore, precious
metals analyst at TheBullionDesk.com, said.
Silver <XAG=> fell as low as $17.09 an ounce and was last
quoted at $17.22/17.27, versus $17.41/17.47 late on Tuesday.
Palladium <XPD=> was at $433/$438 an ounce, down from
$436.50/444.50.
(Additional reporting by Karl Plume in London and Maryelle
Demongeot in Singapore)
(Reporting by Atul Prakash; editing by Nigel Hunt)
