* Gold drops but safe haven seen in equity market turmoil
* Am. Eagles coins top 110,000 oz in May, highest for year
* Platinum, palladium slump to lowest since early February
* Coming up: U.S. April existing home sales on Monday
(Recasts, adds comments, updates with closing prices; changes
dateline from LONDON)
By Frank Tang
NEW YORK, May 20 (Reuters) - Gold prices dropped on
Thursday, although steep equities losses spurred safe-haven
demand for the metal, and palladium plummeted as much as 10
percent on investor fears that a euro zone debt crisis could
hamper economic growth.
Palladium, which dropped for a sixth straight session,
nearly suffered its biggest six-day decline since 2001, as the
industrial metal sold off together with a 10 percent correction
of the S&P 500 U.S. stock index and oil's heavy losses.
Bullion has now ended lower in five of the past six
sessions, after soaring to a record $1,248.95 an ounce last
week on a rush of safety from European buyers. But gold's
limited losses suggested its appeal as insurance during market
turmoil.
"We are in the first round of an across-the-board asset
devaluation. Gold will tend to maintain its value now. It will
periodically sell off as other markets drop, but you will see
money coming back into gold later," said Frank McGhee, head
precious metals trader at Chicago-based Integrated Brokerage
Services.
Sales of European and U.S. coins and bars surged this week,
with the U.S. Mint's American Eagle gold coins rising to its
highest of the year in May, and open interest in COMEX futures
held near an all-time high.
Spot gold <XAU=> was at $1,182.25 an ounce at 2:33 p.m. EDT
(1833 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 NYMEX settled down $4.50 at $1,188.60 an
ounce.
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 sharp rallies to record highs last week.
"When gold hit highs last week, we were looking for some
correction. I wouldn't be surprised if it tested $1,170," said
Walter de Wet, an analyst at Standard Bank.
"(But) Problems in the euro area should continue to provide
some support, These debt problems are not going to go away
overnight. Gold will continued to have this increased
safe-haven status."
Although the pace of new investment in SPDR Gold Trust
<GLD> has showed signs of slowing, holdings of the world's
largest gold-backed exchange traded fund still rose 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
rally.
On Thursday, the U.S. Mint data showed American Eagle
one-ounce gold coins sales totaled 110,500 ounces so far in
May, the highest in 2010, exceeding 60,500 ounces in the entire
month of April.
The euro plunged against the yen but rallied versus the
dollar in extremely choppy trade on mounting fears about a euro
zone debt crisis.
Independent investor Dennis Gartman said he had resumed
buying euro-denominated gold after abandoning his long-held
strategy earlier this week, as current prices looked attractive
after a precipitous drop. []
PLATINUM GROUP TUMBLES ON ECONOMIC JITTERS
For platinum group metals, platinum <XPT=> was at $1,518.50
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, and was at $418.25 against $457.
Citigroup analyst David Thurtell said the metals, which are
largely consumed by the auto industry as catalytic converters,
were caught up in a wider sell-off on the financial markets.
Fears platinum and palladium had become overextended after a
sharp rise this year also pressured prices.
Platinum prices have slipped $200, or 12 percent, this week
alone, while palladium shed more than $120 to its Thursday low,
a 23 percent drop. Nervousness was continuing to dog the
markets, with the euro, equities, oil and base metals all
sliding.
Silver <XAG=> was at $17.75 an ounce against $18.13.
Close Change Pct 2009 YTD
Chg Close % Chg
US gold <GCM0> 1188.60 -4.5 -0.4 1096.20 8.4
US silver <SIN0> 17.715 -0.400 -2.2 16.845 5.2
US platinum <PLN0> 1495.80 -109.90 -6.8 1471.00 1.7
US palladium <PAM0> 408.95 -50.75 -11.0 408.85 0.0
Prices at 3:18 p.m. EDT (1918 GMT)
Gold <XAU=> 1181.25 -9.50 -0.8 1096.35 7.7
Silver <XAG=> 17.71 -0.42 -2.3 16.84 5.2
Platinum <XPT=> 1511.50 -88.50 -5.5 1465.50 3.1
Palladium <XPD=> 418.25 -38.750 -8.5 405.50 3.1
Gold Fix <XAUFIX=> 1192.00 4.75 0.4 1104 8.0
Silver Fix <XAGFIX=> 17.93 -60.00 -3.2 16.99 5.5
Platinum Fix <XPTFIX=> 1515.00 46.00 2.9 1466 3.3
Palladium Fix<XPDFIX=> 420.00 18.00 4.1 402 4.5
(Additional reporting by Jan Harvey and Rebekah Curtis in
London; Editing by Walter Bagley)
