* Gold reverses gains as dollar rallies, oil falls
* Markets seen volatile ahead of quarter's end on Friday
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Julie Crust
NEW YORK/LONDON, Oct 30 (Reuters) - Gold futures ended 2
percent lower on Thursday as tumbling crude oil prices and weak
U.S. economic data led to worries about a global recession,
which could hurt demand for bullion.
"Gold is heading lower along with all the commodities in
general as we are entering a deflationary recession," said
Leonard Kaplan, president of Illinois-based Prospector Asset
Management.
Kaplan cited oil's weakness and said gold was simply
trading "way too high" after Wednesday's rally.
U.S. gold futures for December delivery <GCZ8> settled down
$15.50, or 2.1 percent, at $738.50 an ounce on the COMEX
division of the New York Mercantile Exchange.
Spot gold <XAU=> was at $759 an ounce at 3:12 p.m. EDT
(1912 GMT), compared with Wednesday's close of $754.30. It
earlier rose to $776.30 an ounce, the highest price since Oct.
21.
"We are seeing a similar pattern to base metals with a
strong opening and then giving up all the gains," said Nick
Moore, strategist at Royal Bank of Scotland. "The dollar
strength is one element."
The dollar rallied against the euro, buoyed by demand from
U.S. corporations and global fund managers seeking to square
their books or rebalance their portfolios by month-end. []
"There will be quite a lot of jockeying tomorrow as we come
to the last trading day and I wouldn't be surprised to see a
fairly wild day for not just gold but a number of other
commodities," Moore said.
Lower oil prices also reduced gold's appeal as a hedge
against inflation.
Oil <CLc1> fell toward $65 a barrel, retreating from
earlier gains, pressured by concerns demand might continue to
weaken as the U.S. economy shrank in the third quarter. []
The world's largest economy shrank at a 0.3 percent annual
rate in the third quarter, the sharpest contraction in the
United States in seven years. []
Gold, which traded around $800 earlier this month, was
still well below the record high of $1,030.80 hit in March.
"Precious metal sentiment received a much needed boost
yesterday as the dollar retreated after the Fed's rate cut,"
analyst Manqoba Madinane at Standard Bank said in a research
note.
Gold is still down almost 12 percent since the start of the
month, on track for its biggest monthly decline since 1983, as
an earlier rush for safe-haven assets gave way to a
cross-commodity sell-off by investors scrambling for cash.
"I think all the preconditions are there for gold to take a
very healthy run. The physical demand for gold has actually
exceeded the ability to supply right around the world," said
Ian Smith, managing director of Newcrest Mining Ltd <NCM.AX>,
Australia's largest gold producer.
Silver <XAG=> was at $9.77 an ounce, down 0.5 percent from
Wednesday close of $9.82. In early sessions, it surged almost 7
percent to a high of $10.50.
Platinum <XPT=> was trading at $813 an ounce, after earlier
hitting a high of $870.00 an ounce from $793.50.
Lonmin Plc <LMI.L>, the world's third-largest platinum
producer, said the outlook for platinum prices remained
challenging. []
Prices for platinum have fallen about 45 percent so far
this year and there has been a liquidation from platinum
exchange traded funds in recent days.
Palladium <XPD=> was at $195 an ounce, slightly higher than
its Wednesday finish of $194.50.
(Editing by Christian Wiessner)
