* Gold, silver tumble as equities, commodities slide
* Platinum group metals slip sharply on demand fears
* Dollar firms but oil slides $2 a barrel
(Recasts, adds comment, updates prices)
By Jan Harvey
LONDON, Oct 16 (Reuters) - Bullion prices slipped sharply on
Thursday, with gold touching a one-month low and silver sliding
to its weakest level in more than two years, as losses on the
equity markets triggered a sell-off in commodities.
Platinum, palladium and rhodium prices also tumbled,
extending sharp losses, as investors sold the metal on fears the
U.S. economy could be facing recession and demand would plunge.
A broad sell-off of commodities saw declines in crude oil,
copper, aluminium, cocoa and grains.
Spot gold <XAU=> fell to a session low of $792.50 an ounce,
before bouncing back to $801.10/804.10 at 1443 GMT, against
$848.00 in late New York trade on Wednesday.
Silver <XAG=> reached a low of $9.50 an ounce before
recovering to trade at $9.64/9.72 against $10.23.
Losses on other markets and relative strength in the U.S.
dollar are pressuring gold.
"What we're seeing in the overall global economy is
deflationary," said Tom Hartmann, a trader at Altavest.
"Commodity prices are going down, and the dollar's rallying.
Gold doesn't do very well in a deflationary environment."
U.S. stocks were choppy in early trade, bouncing at the open
but slipping after the Philadelphia Federal Reserve Bank said
its business activity index slumped unexpectedly in September.
[]
"Markets generally are just selling off. It is that, as much
as anything else, that gold is being caught up in," said Stephen
Briggs, an analyst at RBS Global Banking & Markets. "People need
to liquidate assets to cover losses elsewhere."
The dollar was firmer against the euro as risk-averse
investors sought safety, despite dipping against the single
currency after the release of the Philly Fed survey.
A stronger dollar typically weighs on gold, which is often
bought as an alternative investment to the U.S. currency. Weaker
oil prices, which tumbled more than $2, are also undermining
gold's appeal as an inflation hedge. []
The market is now awaiting fresh moves from governments and
central banks to address the credit crisis.
Traders say they expect more rate cuts from the U.S. Federal
Reserve. While in the long term any economic stimulation is
likely to pressure gold, analysts say in the short run it would
boost the appeal of non-interest bearing assets like bullion.
STRONG INTEREST
Among other precious metals, platinum plummeted and
palladium slipped as investors feared a recession could cut
demand for the metals, primarily used in catalytic converters.
Rhodium, which has similar applications, also fell, and has
plummeted more than 40 percent since Tuesday.
"Car sales in Europe were down 8.2 percent year on year in
September," said Commerzbank in a reasearch note.
"Moreover, industry consultant JD Powers is expecting US car
sales to hit their lowest level for 17 years this month, and
also sees demand in China cooling off considerably."
Investec downgraded its price forecasts for the platinum
group metals, citing poor demand among other factors. It slashed
its platinum forecasts by 14 percent in 2008 and 32 percent in
2009, to $1,629 an ounce and $1,350 an ounce respectively.
[]
It cut its 2008 rhodium forecast by 19 percent to $7,123 and
its 2009 forecast by a quarter to $5,625. It also said it now
sees palladium at $368 this year and $318 in 2009, having
downgraded its forecasts 9 percent and 21 percent respectively
Spot platinum <XPT=> slipped nearly 8 percent to $882/902 an
ounce from $955 late in New York on Wednesday, while palladium
<XPD=> fell nearly 13 percent to $165, before recovering to
$168/178 from $189.
Rhodium <RHO-LON> slipped another 20 percent to trade at
$1,850 an ounce against $2,450 on Wednesday.
(Reporting by Jan Harvey; editing by Peter Blackburn)
