* Gold down, set for largest monthly fall since 1983
* Oil hovers around $64, set for its biggest monthly fall
* Dollar rises against euro, major currencies
(Updates prices, adds comment)
By Humeyra Pamuk
LONDON, Oct 31 (Reuters) - Gold prices drifted lower on
Friday and headed for their biggest monthly drop in more than 20
years as a strong dollar and recession fears triggered a
sell-off, traders and analysts said.
Macroeconomic data on Thursday that showed the U.S. economy
had shrunk 0.3 percent, the sharpest fall in seven years,
escalated recession worries and knocked down all commodities,
including metals and oil.
Platinum <XPT=> fell almost 6 percent as slowing economies
around the globe and the credit crisis caused the largest auto
industry companies to slash full-year profit targets, warn of
job losses and push for speedy government handouts.
Gold <XAU=> was at $725.10 an ounce by 1616 GMT, having
trimmed losses after hitting a low of $720.70 an ounce, compared
with $735.50 an ounce late on Thursday in New York.
"Gold's moves today are mainly currency driven," said Simon
Weeks, director of precious metals at the Bank of Nova Scotia.
"At the month-end, flows are in favour of the dollar."
The dollar was firmer against most major currencies on
expectations of large dollar demand for the end of the month.
Gold tends to move in the opposite direction to the dollar as a
strong U.S. currency makes bullion more expensive for local
currency holders.
DOLLAR THE DRIVER
"The key driver for gold at the moment is the U.S. dollar
and it looks like it is going to strengthen again and that is
definitely negative for gold," a London-based trader said.
U.S. data released on Friday showed consumers cut their
monthly spending for the first time in two years during
September, evidently bracing for hard times as jobs continue to
disappear and credit conditions tighten.
"In times of recession, the most likely scenario for gold is
it goes down a lot, especially if it is trading at historically
high levels," said Jesper Dannesboe, senior commodity strategist
at Societe Generale.
"Because the fears of inflation will be replaced by fears of
disinflation and that is a killer for gold ... I think gold is
going below $600 in this cycle."
The metal has lost as much as 21 percent of its value this
month alone, and is down 12 percent this year, well below the
record high of $1,030.80 struck in March.
It hit a 13-month low of $680.80 last week after investors
sold bullion to pay for margin calls. A recovery in stock
markets and firmer oil spurred a rebound in gold this week but
technical selling emerged after did not sustain Thursday's high.
Oil <CLc1> slipped for a second day, dropping more than 3
percent towards $64 a barrel and is set for its biggest monthly
loss as weak U.S. data rekindled demand worries, which, in
theory, reduces gold's appeal as a hedge against inflation.
[]
Platinum <XPT=> was trading at $807.50 ounce, after touching
an intraday low of $770, down from $817.00 in New York. It has
lost more than 60 percent of its value since hitting a lifetime
high of $2,290 in March, mainly due to worries about falling
demand for autocatalysts.
As the strong yen forced Japanese carmakers Mazda <7261.T>
and Mitsubishi <7211.T> to slash full-year targets, struggling
U.S. automakers were looking to obtain billions from the U.S.
government to help them to survive. []
New York gold futures <GCZ8> fell $8.4 an ounce to $730.9.
Palladium <XPD=> was at $193.00 from $197.00, while spot
silver <XAG=> was bucking the falling trend at $9.85 compared to
Thursday's $9.66 late in New York.
(Additional reporting by Anna Stablum in London, editing by
Anthony Barker)
