* Platinum drops to its lowest level since October 2006
* Gold slides nearly 2 pct on weak oil, strong dollar
* Markets await U.S. Federal Reserve decision
(Recasts on platinum, adds ETFs, fresh comments, detail)
By Agnieszka Flak
LONDON, Sept 16 (Reuters) - Platinum slipped more than 9
percent on Tuesday to its lowest level since October 2006 as a
weakening global economy hit demand from auto makers, with car
sales dropping in Europe, China and the United States.
Platinum, mainly used in auto-catalysts, lost half of its
value in the last six months from a record high of $2,290 an
ounce in March as consumer confidence dipped and demand for cars
weakened on the back of high fuel prices and weaker economies.
Spot platinum <XPT=> dropped to $1,055 an ounce, the lowest
since October 2006, and was last quoted at $1,064/1,095 an ounce
at 1420 GMT from Monday's $1,164.50.
"We continue to get absolutely dreadful news on car sales.
said Stephen Briggs, commodity strategist at RBS Global Banking
and Markets.
Demand for new cars in Europe fell by 7.3 percent in July
and 15.6 percent in August compared with a year ago. Over the
first eight months of the year, new car registrations in Europe
fell by 3.9 percent. []
Sales of passenger cars in China, the world's second-largest
auto market, fell more than 6 percent in August.
"The idea of China making up the difference on slowdown
elsewhere -- when you are talking about the automobile industry,
that is plainly not true."
ACROSS-THE-BOARD SELLING
Gold fell nearly 2 percent alongside a sharp drop in oil as
the dollar firmed ahead of a decision on interest rates by the
U.S. Federal Reserve.
Although gold normally gains on safe-haven buying during
financial crises, portfolio managers have been selling assets
across the board after U.S. investment bank Lehman Brothers
<LEH.N> filed for bankruptcy. []
Spot gold <XAU=> was 0.7 percent lower at $781.40/782.50 an
ounce from a session low of $771.55 from Monday's close of
$786.20. Earlier it touched a one-week high of $786.95.
Robin Bhar, analyst at Calyon, said oil and the dollar were
weighing on gold.
"Although gold might be struggling in the short term, the
longer this goes on, it should be positive," he said.
The dollar slid to a two-month low versus a broadly rallying
yen as a wave of risk aversion sparked by the collapse of Lehman
Brothers rippled across markets. []
Crude oil prices slipped nearly $3 to a seven-month low as
the escalating credit crisis reinforced fears that global
economic weakness could further depress energy demand. []
"You might see more people coming into the market on the
long side looking to buy gold if financial conditions continue
to deteriorate," Bhar said.
Precious metals were undermined on selling led by Asian
investors returning from a three-day weekend.
Markets will closely watch the outcome of the Federal
Reserve's meeting later in the day. Speculation of a rate cut is
growing to help ease tensions in financial markets.
Investors and analysts will also scrutinise the Fed's
statement on the outlook for growth in the United States.
ETF SELLING
Investors selling of gold held by exchange-traded funds also
knocked confidence in the precious metal, analysts said.
ETF Securities said on Monday that the amount fo gold it
held to back its Physical Gold <PHAU.L> exchange-traded
commodity fell 16 percent last week to 1.551 million ounces.
The world's biggest gold-backed ETF, SPDR Gold Trust <GLD>,
said its holdings fell more than 37 tonnes, or 5 percent, since
the beginning of September.
"Index divestment and possibly ETF disinvestment may be
weighing on gold for reasons of growing or new awareness of
counter-party risks in owning these products," UBS analysts John
Reade said in a note to clients.
Spot palladium <XPD=> tumbled more than 5 percent, falling
in line with platinum to trade 4.3 percent lower at $221.50 an
ounce.
Spot silver <XAG=> was trading 4.3 percent lower at
$10.61/10.67 an ounce, from Monday's close of $11.08 after
hitting an intra-day low of $10.46.
(Editing by Christopher Johnson)
