* Gold caught up in selling of euro, stocks, oil
* Longer-term support seen from euro zone debt issues
* Platinum, palladium slump to lowest since early Feb
(Releads, updates prices, adds comment)
By Jan Harvey
LONDON, May 20 (Reuters) - Gold slipped and platinum and
palladium tumbled to three-month lows on Thursday as a decline
in equities and volatility in the currency markets prompted
investors to cash in gains in precious metals.
Spot gold <XAU=> was bid at $1,187.35 an ounce at 1524 GMT,
against $1,190.75 late in New York on Wednesday. U.S. gold
futures for June delivery <GCM0> on the COMEX division of the
New York Mercantile Exchange fell $4.50 to $1,188.60 an ounce.
Platinum <XPT=> was at $1,517 an ounce against $1,600,
having earlier fallen more than 7 percent to $1,482.90 an ounce.
Palladium <XPD=> dropped 12 percent to a low of $402.65, before
edging up to $423.80 against $457.
Citigroup analyst David Thurtell said the white metals were
caught up in a wider sell-off on the financial markets. Fears
platinum and palladium had become overextended after a sharp
rise earlier this year also pressured prices.
"That has been a popular trade to get long this year, and it
became such a crowded trade," he said. "There is (now) a bit of
reality creeping in."
Platinum prices have slipped $200 or 12 percent this week
alone, while palladium shed more than $120 to its Thursday low
or 23 percent. Nervousness is continuing to dog the markets,
with the euro, equities, oil and base metals all sliding.
European shares fell 3.3 percent in afternoon trade,
extending the previous day's hefty losses, on persistent fears
other euro zone countries will follow Germany in banning short
selling in certain instruments.
U.S. stocks also added to losses after data showed factory
activity in the mid-Atlantic region accelerated less than
expected in May. [] []
The drop in equity prices has forced some liquidation of the
precious metals to cover losses elsewhere, analysts said.
"Prices have come under pressure as profit-taking has
emerged on the back of margin calls across other assets," said
Barclays Capital in a note.
UNDER PRESSURE
The euro fell against major currencies on Thursday, shedding
0.7 percent against the dollar <EUR=>, while oil lost nearly 4
percent, sliding to its lowest in nearly eight months. []
[]
Gold fell along with other assets, hitting a two-week low at
$1,174.35 an ounce. Analysts said the market had become
overextended after its rise to record highs at $1,248.95 an
ounce last Friday.
"When gold hit highs last week we were looking for some
correction," said Walter de Wet, an analyst at Standard Bank. "I
wouldn't be surprised if it tested $1,170."
"Problems in the euro area should continue to provide some
support," he added, however. "These debt problems are not going
to go away overnight. Gold will continued to have this increased
safe haven status."
Investment demand for physical gold has been firm this week,
with holdings of the world's largest gold-backed exchange-traded
fund, New York's SPDR Gold Trust <GLD>, rising to a record
1,220.152 tonnes on Wednesday. []
Strong inflows into U.S. and European ETFs, plus a recovery
in sales of gold coins and bars, helped spark last week's price
rise. The current correction notwithstanding, analysts believe
its uptrend will resume.
"When we have had these sell-offs in gold because of market
disruption, which we had in October 2008 when it fell by $100 in
one day, it has after that found a new level and started to rise
again," said VM Group analyst Matthew Turner.
Silver <XAG=> was bid at $17.87 an ounce against $18.13.
(Additional reporting by Rebekah Curtis; Editing by Sue
Thomas)
