* U.S. CPI posts largest monthly jump since 1982
* Stronger dollar caps gains
* Platinum extends losses amid demand fears
(Recasts, adds comment/detail, updates prices)
By David Sheppard and Jan Harvey
LONDON, July 16 (Reuters) - Gold fell in volatile trade on
Wednesday after oil prices dropped sharply for the second
consecutive day, prompting a flurry a selling.
New York crude oil prices fell by over $6 a barrel to touch
a session low of $132, reducing gold's appeal as a hedge against
fuel-led inflation.
Gold has been boosted in recent weeks as oil has broken a
series of record highs. However, gold has come off as crude
prices have now fallen by more than $10 in the last two days on
fears of slowing demand.
"The liquidation we've seen in oil has definitely led to
some profit-taking in gold," said Bulliondesk.com analyst James
Moore."
Spot gold <XAU=> sank to a session low of $960.35 and was at
$971.10/962.10 an ounce at 15414 GMT from $975.90/977.90 an
ounce late in New York on Tuesday, when it hit a four-month high
of $987.75.
Gold has been supported in recent days by tumbling stocks
and a weak dollar, which on Tuesday hit a record low against the
euro. []
But on Wednesday the dollar's recovery against the euro on
optimism over stability in the U.S. financial system hit
sentiment in gold, which earlier touched $969.30 an ounce.
"A few are calling for another test of $1,000 an ounce, with
heightened inflationary pressures, rising fears of financial and
geopolitical risk and the weak dollar," said Calyon analyst
Robin Bhar.
INFLATION
"But people want to see some stability. If we can hold above
here for a couple of days, then maybe more participants will be
tempted to dip their toes in the water."
Gold hit an all-time high of $1,030.80 an ounce on March 17.
Gold had been boosted earlier on Wednesday by a jump in U.S.
consumer prices, which showed a 1.1 percent jump in June and a 5
percent rise year-on-year. []
"The inflation factor is definitely still there -- oil and
food prices remain at very high levels," said Moore at
TheBullionDesk.com.
"$1,000 an ounce is still a possibility as all the factors
are still painting a very attractive picture for gold."
Among other precious metals, spot silver <XAG=> tracked gold
lower to $18.67/18.75 an ounce from $18.86/18.93 on Tuesday.
Platinum <XPT=> dipped to a two-month low of $1,931 an
ounce, however, as the gloomy outlook for the global economy
deepened fears over demand from carmakers for autocatalysts, of
which the white metal is a major component.
"Concerns over demand from autocatalysts (are pulling) down
prices following news from Toyota that it will cut this year's
global sales target by 350,000 vehicles to 9.5 million," said
Fairfax analyst Marc Elliott in a note.
"Another major auto producer, GM, yesterday said it would
cut dividends and sell assets to raise cash due to weak sales."
Platinum was at $1,940.00/1,950.00 an ounce from
$1,971/1,991 on Tuesday. It has fallen nearly 5 percent over the
last month.
Spot palladium fell to $428.00/4436.00 an ounce from
$440.00/448.00 late in New York.
(Reporting by David Sheppard; editing by Christopher
Johnson)
