* Precious metals tumble broadly on investor cash run
* Platinum group metals slip sharply on demand fears
* Dollar firms but oil slides sharply a barrel (Recasts, updates with quotes, closing prices, market activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, Oct 16 (Reuters) - Bullion prices sank on Thursday to one-month lows below $800 as commodity funds and investors dumped liquid assets and opted for cash amid heightened uncertainty in global markets.
Silver and platinum group metals also plunged to multiyear lows, extending sharp losses as investors sold economically sensitive metals on fears that demand would plunge if the U.S. economy fell into recession.
The broad sell-off in commodities also saw declines in crude oil, copper, aluminum, cocoa and grains. Broad-based commodity index Reuters/Jefferies CRB <.CRB> dropped 2.5 percent.
Spot gold <XAU=> fell to a session low of $786.80 an ounce, before bouncing back to $801.10 an ounce at midafternoon, down 5.6 percent from Wednesday's nominal close of $848.00.
The U.S. gold futures contract for December delivery <GCZ8> settled down $34.50, or 4.1 percent, at $804.500 an ounce on the COMEX division of the New York Mercantile Exchange.
"Hedge funds, the speculative type of players, and the investment community are struggling for cash. Liquidity and the credit markets are still very tight, and all they are doing is selling their liquid assets," said James Moore, analyst at TheBullionDesk.com.
There was talk among traders on Thursday that the Swiss National Bank might sell gold to help fund the troubled Swiss financial firm UBS AG. [
]The Swiss National Bank was the biggest seller within Europe's Central Bank Gold Agreement in the fourth year of the current pact, selling 137 tonnes of gold. [
]Jonathan Jossen, COMEX gold options floor trader, said that a big commodity fund was selling all commodities including gold in exchange for cash.
"You have commodity funds that are selling all around ... and that was exaggerated as there are not too many traders today," Jossen said.
The U.S. stock market recovered from initial losses to trade slightly higher, seesawing in a volatile session. [
]Losses on other markets and relative strength in the U.S. dollar pressured gold.
"What we're seeing in the overall global economy is deflationary," said Tom Hartmann, a trader at Altavest.
"Commodity prices are going down, and the dollar's rallying. Gold doesn't do very well in a deflationary environment."
A stronger dollar typically weighs on gold, which is often bought as an alternative investment to the U.S. currency. Weaker oil prices, which tumbled more than $5, are also undermining gold's appeal as an inflation hedge. [
] [ ]The market is now awaiting fresh moves from governments and central banks to address the credit crisis.
Traders say they expect more rate cuts from the U.S. Federal Reserve. While in the long term any economic stimulation is likely to pressure gold, analysts say in the short run it would boost the appeal of noninterest-bearing assets like bullion.
STRONG INTEREST
Among other precious metals, platinum plummeted and palladium slipped as investors feared a recession could cut demand for the metals which are primarily used in automotive catalytic converters.
Rhodium <RHO-LON>, which has similar applications, has plummeted more than 40 percent since Tuesday and slipped 20 percent on Thursday to trade at $1,850 an ounce against $2,450 on Wednesday.
"All the big firms are getting out of commodities right now. They are getting out of the platinum and palladium positions and just looking for cash," said Adam Rabinowitz at RJ Futures in New York.
Spot platinum <XPT=> slipped nearly 9 percent to $872.00 an ounce from $955 late in New York on Wednesday, while palladium <XPD=> fell nearly 11 percent before recovering to $168.50 from $189 on Wednesday.
Silver <XAG=> reached a low of $9.30 an ounce before recovering to $9.62, down 7 percent from Wednesday's nominal close of $10.23. (Editing by Jim Marshall)