* Bullion's inflation hedge appeal dented by oil slide
* Gold initially supported as U.S. consumer prices jump
* Platinum extends losses on demand fears
(Updates with New York prices, quotes; editing)
By David Sheppard and Jan Harvey
LONDON, July 16 (Reuters) - Gold ended sharply lower in
volatile trading on Wednesday after oil prices dropped sharply
for the second consecutive day, prompting a flurry a selling.
New York crude oil prices fell by more than $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 past two days on
fears of slowing demand. U.S. crude futures <CLc1> ended down
$4.14 at $134.60 a barrel.
"The liquidation we've seen in oil has definitely led to
some profit-taking in gold," said TheBullionDesk.com analyst
James Moore.
Spot gold <XAU=> sank to a session low of $959 and was at
$963.10/964.10 by New York's last quote at 2:15 p.m. EDT (1815
GMT), down from $975.90/977.90 an ounce late in New York on
Tuesday, when it hit a four-month high of $987.75.
U.S. gold futures for August delivery <GCQ8> settled down
$16, or 1.6 percent, at $962.70 an ounce on the COMEX division
of New York Mercantile Exchange.
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 March 17.
The metal was boosted early on Wednesday by a jump in U.S.
consumer prices, which showed a 1.1 percent increase 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 $18.72/18.80 an ounce from $18.86/18.93 late on
Tuesday in New York.
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,"
Fairfax analyst Marc Elliott said 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 $1,919.00/1,939.00 an ounce, down from
$1,971/1,991 late on Tuesday in the U.S. market. It has fallen
nearly 5 percent over the past month.
Spot palladium <XPD=> fell to $425.00/433.00 an ounce from
$440.00/448.00, its Tuesday close in New York.
(Additional reporting by Frank Tang in New York)
