* Wilting dollar helps commodities recover
* Safe-haven demand could reemerge if economy worsens
* Chinese car sales jump 47.7 pct in June, boost platinum
(Recasts, updates prices, market activity to close; new
byline, changes dateline, pvs LONDON)
By Frank Tang
NEW YORK, July 9 (Reuters) - Gold futures ended higher on
Thursday as the slumping dollar boosted bullion's appeal as a
currency hedge, but weak investment demand amid lower inflation
expectations could send prices lower.
Even with the stock market weakened by economic worries,
bullion has failed to rise. Muted inflation concerns have sent
flight-to-quality buying into U.S. Treasuries and the dollar.
Thomas Winmill, portfolio of Midas Fund in New York, said
gold's weakness was similar to the widespread selling of all
asset classes into the U.S. Treasury bonds market in 2008.
"If the economic pessimism continues, I would expect gold
to recover like the way it did before in 2008," Winmill said.
A flight to quality could still boost gold in the future,
but a lack of imminent inflation signals has been weighing on
the metal's appeal as a hedge, market watchers said.
U.S. August futures <GCQ9> settled up $6.90 at $916.20 an
ounce on the COMEX division of the New York Mercantile
Exchange.
Spot gold <XAU=> traded at $915.80 an ounce at 2:25 p.m.
EDT (1825 GMT), against $908.45 an ounce late in New York on
Wednesday, when gold sold off in line with other commodities on
fears of stricter U.S. government regulation of markets.
The dollar fell sharply, giving back some of Wednesday's
gains as investors ventured back into equities, denting
interest in the currency as a haven from risk. []
Stock markets edged higher after a five-day losing streak,
industrial commodities such as oil and base metals gained and
currency markets became less cautious, suggesting heavy risk
aversion may be abating.
Demand for gold investment products such as exchange-traded
funds -- a major support of prices earlier in the year amid
volatility in other markets -- remained sluggish, however.
Holdings of the world's largest gold ETF, the SPDR Gold
Trust <GLD>, declined more than 10 tonnes on Wednesday, while
those of ETF Securities' ETFS Physical Gold product slipped
12,500 ounces 0.4 percent. []
OUTPUT FALLS
In supply news, South Africa, the world's third largest
gold miner after China and the United States, said its output
of the metal fell 10.5 percent in May from a year ago.
Among other precious metals, platinum <XPT=> was at
$1,106.50 an ounce against $1,096, while palladium <XPD=> was
at $234.50 against $231.50. Both metals are used primarily in
car manufacturing as a component in catalytic converters.
Traders of palladium in particular were cheering news from
China that its passenger car sales rose 47.7 percent in June
from a year earlier. []
Chinese cars are usually petrol-fueled, meaning they use a
higher proportion of palladium than platinum, which is a
primary component in diesel catalysts.
Elsewhere silver <XAG=> was at $12.89 an ounce against
$12.84.
(Additional reporting by Jan Harvey in London; Editing by
David Gregorio)
