* Precious metals tumble broadly on investor cash run
* Platinum group metals slip sharply on demand fears
* Dollar firms but oil slides sharply a barrel
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Oct 16 (Reuters) - Bullion prices sank on
Thursday to one-month lows below $800 as commodity funds and
investors dumped liquid assets and opted for cash amid
heightened uncertainty in global markets.
Silver and platinum group metals also plunged to multiyear
lows, extending sharp losses as investors sold economically
sensitive metals on fears that demand would plunge if the U.S.
economy fell into recession.
The broad sell-off in commodities also saw declines in
crude oil, copper, aluminum, cocoa and grains. Broad-based
commodity index Reuters/Jefferies CRB <.CRB> dropped 2.5
percent.
Spot gold <XAU=> fell to a session low of $786.80 an ounce,
before bouncing back to $801.10 an ounce at midafternoon, down
5.6 percent from Wednesday's nominal close of $848.00.
The U.S. gold futures contract for December delivery <GCZ8>
settled down $34.50, or 4.1 percent, at $804.500 an ounce on
the COMEX division of the New York Mercantile Exchange.
"Hedge funds, the speculative type of players, and the
investment community are struggling for cash. Liquidity and the
credit markets are still very tight, and all they are doing is
selling their liquid assets," said James Moore, analyst at
TheBullionDesk.com.
There was talk among traders on Thursday that the Swiss
National Bank might sell gold to help fund the troubled Swiss
financial firm UBS AG. []
The Swiss National Bank was the biggest seller within
Europe's Central Bank Gold Agreement in the fourth year of the
current pact, selling 137 tonnes of gold. []
Jonathan Jossen, COMEX gold options floor trader, said that
a big commodity fund was selling all commodities including gold
in exchange for cash.
"You have commodity funds that are selling all around ...
and that was exaggerated as there are not too many traders
today," Jossen said.
The U.S. stock market recovered from initial losses to
trade slightly higher, seesawing in a volatile session. []
Losses on other markets and relative strength in the U.S.
dollar pressured 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."
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 $5, 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 noninterest-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 which are primarily used in automotive
catalytic converters.
Rhodium <RHO-LON>, which has similar applications, has
plummeted more than 40 percent since Tuesday and slipped 20
percent on Thursday to trade at $1,850 an ounce against $2,450 on Wednesday.
"All the big firms are getting out of commodities right
now. They are getting out of the platinum and palladium
positions and just looking for cash," said Adam Rabinowitz at
RJ Futures in New York.
Spot platinum <XPT=> slipped nearly 9 percent to $872.00 an
ounce from $955 late in New York on Wednesday, while palladium
<XPD=> fell nearly 11 percent before recovering to $168.50 from
$189 on Wednesday.
Silver <XAG=> reached a low of $9.30 an ounce before
recovering to $9.62, down 7 percent from Wednesday's nominal
close of $10.23.
(Editing by Jim Marshall)
