* Plat, pallad off lows after hitting lowest since early Feb
* Gold arrests this week's big slide as debt fears persist
* Equities weak; 'fear' index hits highest since Mar 09
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By Jan Harvey
LONDON, May 21 (Reuters) - Platinum and palladium recovered
some of the losses that took them to 3-1/2 month lows earlier on
Friday, but are still on track for their worst week in years
after fund selling early in the week sparked a sharp price drop.
Reuters data shows platinum heading for its biggest one-week
percentage drop since late 2008 and palladium its worst week
since at least 1984.
Gold was steadier, meanwhile, arresting a slide that took it
to two-week lows earlier in the session, as lower prices tempted
some buyers back to the market amid persistent fears over the
euro zone debt crisis.
Spot gold <XAU=> was bid at $1,179.05 an ounce at 1145 GMT,
against $1,181.10 late in New York on Thursday. U.S. gold
futures for June delivery <GCM0> on the COMEX division of the
New York Mercantile Exchange fell $9.00 to $1,179.70 an ounce.
Platinum <XPT=> was at $1,484 an ounce against $1,509 after
earlier falling around 15 percent from last Friday's level.
Palladium <XPD=> was at $410.93 versus $412.75, after falling to
$393, down 25 percent on the week.
"I tend to think the sell-off (in platinum group metals) has
been a kneejerk reaction, and has been a little bit overdone,"
said Societe Generale analyst David Wilson.
"We have seen quite a lot of consumer hedging on the PGMs
yesterday, which makes sense," he added. "If you are a big car
producer and you want to lock in a lower price, yesterday was a
good day to do it."
Gold prices meanwhile recovered after earlier falling to a
low of $1,166.50 an ounce, down more than 5 percent from last
Friday. Traders say prices are due a period of consolidation
after rising 6 percent in the first two weeks of May to record
highs at $1,248.95 an ounce.
"We traded up from $1,125 to the high at $1,248 not even in
a month, so it is quite normal that you have a movement against
that," said Commerzbank trader Michael Kempinski.
"There is really too much investor money in there, and the
funds are not all interested in the long term performance."
SOVEREIGN DEBT
Fear remains a driving force in the market. The .VIX index,
Wall Street's chief measure of volatility, closed at its highest
since March 2009 on Thursday on growing fears over the euro
zone's handling of its sovereign debt problems.
Equity markets extended losses on Friday, on persistent
concern over euro zone sovereign debt levels and tougher
financial regulation. European shares <> were down 2.4
percent just after midday. []
The euro <EUR=> clung onto its gains against the dollar as
fears of currency intervention rose. Oil prices meanwhile fell
back below $70 a barrel, having touched their lowest since July
on Thursday. [] []
Investment demand for physical gold continued to be firm,
meanwhile, with holdings of the world's largest gold-backed
exchange-traded fund, New York's SPDR Gold Trust <GLD>, at a
record 1,220.152 tonnes on Thursday. []
The gold exchange-traded products operated by London's ETF
Securities were also little changed on Thursday.
The resilience of ETF holdings during gold's latest leg
lower has cheered investors who believe the longer-term outlook
for the metal against a backdrop of volatility in the wider
markets and rising fears over euro zone debt levels is positive.
"The move in gold has been really unusual, given the level
of concern in the markets," said Nick Bullman, managing director
of Bullman Asset Management.
"My view is still that in a period of strong monetisation by
governments, it will come out as the only real store of value,"
he said. "It can get to $1,300 this year, and it will go higher
if things spiral out of control. This is a great buying
opportunity."
Silver <XAG=> was bid at $17.70 an ounce against $17.59.
(Editing by Keiron Henderson)
