* Gold at lowest level since September 2007
* Liquidity fears among funds pummel gold, precious metals
* Platinum to four-year low on dollar, weak demand
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Julie Crust
NEW YORK/LONDON, Oct 23 (Reuters) - Gold prices hit their
lowest levels in more than a year on Thursday, briefly trading
below $700 an ounce, as funds sold heavily to raise cash, but a
reversal of the dollar's strength lifted bullion off its
session lows.
Platinum and palladium also dropped on worries over demand
from automakers, who use the metals to make catalytic
converters, as the stock markets remained extremely volatile.
Spot gold <XAU=> was at $713.65 an ounce at 2:40 p.m. EDT
(1840 GMT), down 1.9 percent from Wednesday's close. Earlier it
touched a low of $697.45, its weakest since September 2007.
"I still think it's all about raising cash and capital
preservation. The market is way too long," said Bruce Dunn,
vice president of trading at New Jersey-based Auramet Trading.
"All the mining companies are saying gold is going back to
$1,000, but I think these people are living in la-la land.
You've got a serious recession and people are not buying gold
jewelry," Dunn said.
Jewelry buying represents more than 60 percent of annual
global gold demand. according to research firm GFMS.
"Funds are liquidating, trying to raise cash. Technically,
we broke down yesterday below $738 (COMEX futures). I think
people are getting short," said one COMEX gold futures floor
trader.
U.S. gold futures for December delivery <GCZ8> settled down
$20.50, or 2.8 percent, at $714.70 an ounce on the COMEX
division of the New York Mercantile Exchange.
The dollar climbed to a fresh two-year high versus the euro
and a basket of currencies in choppy trade as investors wary of
a severe global recession kept their faith in reserve
currencies. []
Oil prices also supported gold. U.S. crude futures <CLc1>
ended up $1.09 at $67.84 a barrel as investors bet on an output
cut from oil cartel OPEC at Friday's emergency meeting. []
But bullion remains under pressure from falling demand in
India, the world's biggest consumer of physical gold.
"Industry analysts have reported the demand for gold during
the buildup to the Indian festive season has been muted when
compared to previous years," Credit Suisse said in a note.
Gold prices have gyrated in recent months as financial
markets have slumped. The World Gold Council said price
volatility spiked in the third quarter, rising to 39 percent
from 23 percent the quarter before. []
PLATINUM DROPS FURTHER
Platinum slid more than 7 percent to its session lows,
extending losses that have seen prices fall by half since early
August, as the firm dollar added to pressure on prices.
The white metal has already been hit by falling demand from
carmakers, who account for half of platinum use.
Spot platinum <XPT=> was at $787.00, down 5.4 percent from
Wednesday's late quote. Earlier it touched a low of $770, its
weakest since July 2004. Its sister metal palladium <XPD=>
dropped 3.2 percent to $168.00.
Silver <XAG=> initially strengthened on firm Indian demand
but turned lower to end at $9.39, down 1.2 percent from
Wednesday's finish, as it followed gold into negative
territory.
Investment demand for the metal is also strong. The iShares
Silver Trust, the world's largest silver backed ETF, said its
holdings stood at a near-record 6,895.58 tonnes on Monday, the
last day for which figures are available.
(Additional reporting by Jan Harvey in London; editing by Jim
Marshall)
