UPDATE 2-Gold extends losses after sharp fall on lower oil

                                
  (Recasts headline, lead, updates prices)
                                
 By Maryelle Demongeot
                                
 SINGAPORE, May 30 (Reuters) - Gold fell further on Friday,
adding to losses of the previous session when it fell by more
than 2 percent, as oil fell further and the dollar steadied at
close to a three-month high against the yen.
                                
 Spot gold <XAU=> stood at $874.85/875.85 an ounce by 0640
GMT, down from $877.85/879.25 an ounce late in New York on
Thursday.
                                
 Gold fell sharply on Thursday, dragged down by oil prices
that continued to retreat from last week's record highs, and a
stronger dollar that has risen to close to a three-month high
against the yen.
                                
 "The U.S. dollar was firmer and oil prices were weaker.
These influenced gold prices because of their impact on
investment flows and inflation expectations," said David Moore,
an analyst with Commonwealth Bank of Australia in Sydney.
                                
 Gold is sought after as an alternative currency and hedge
against inflation, and tends to move in an opposite direction
to the dollar.
                                
 The U.S. dollar was quoted at 105.38 yen <JPY=> on Friday,
having risen earlier as high as 105.76 yen, close to the 105.88
yen struck on Thursday after an upward revision to U.S.
economic growth figures added to evidence that the United
States may stave off recession and underscored expectations for
the Federal Reserve to raise interest rates this year. [USD/]
                                
 The U.S. economy grew a bit faster than initially thought
in the first quarter, with gross domestic product up a 0.9
percent annual rate, against earlier estimates calling for a
rate of 0.6 percent.
                                
 "Over the next few months, gold could remain very volatile
as it is influenced very much by movements in the U.S. dollar,
which will in turn be influenced by perceptions of the outlook
for the U.S. economy," Moore added.
                                
 The U.S. dollar index <DXY.>, which measures the dollar's
value against a basket of major currencies, was up 0.13 percent
at 73.067.
                                
 Meanwhile, oil fell below $126 a barrel on Friday,
extending $4.41 losses made on Thursday, when traders shrugged
off an unexpected drop in weekly inventories and focused on
signs that oil demand was edging down in the U.S. and in Asia's
developing countries.
                                
 Front-month U.S. crude for July delivery <CLc1> was down 87
cents at $125.77 a barrel on the Globex electronic trading
platform, down more than $8 from last week when it hit a record
high $135.09.
                                
 Gold futures for August delivery <GCM8> on the COMEX
division of the New York Mercantile Exchange were down $2.80 an
ounce at $878.90 an ounce.
                                
 The most active Tokyo gold futures contract <0#JAU:>, for
April, tracked the fall in gold prices and was down 71 yen at
2,987 yen per gram.
                                
 Other precious metals also fell in line with gold, with
platinum slipping by more than 4 percent on Thursday to touch a
three-week trough and sliver shedding 4.3 percent in choppy
trade.
                                
 Spot platinum <XPT=> extended losses to $1,955/1,967 an
ounce, from $1,990.50/2,010.50 in late trade on Thursday.
                                
 The most active Tokyo platinum futures <0#JPL:> contract
for April was down 289 yen per gram to 6,464 yen by the end of
the morning session, heading towards its 300-yen daily limit
fall..
                                
 Spot silver <XAG=> fell to $16.54/16.60 an ounce from
$16.86/16.92 late in New York, unmoved by a decision by Peru's
largest federation of mining unions to hold a nationwide strike
starting on June 16 after Congress delayed voting on a bill to
improve labour benefits.
                                
  Peru is the world's leading silver producer, ranks second
in copper and zinc, and fifth in gold, according to government
data. [ID:nN29409394]
                                
 Spot palladium <XPD=> also fell, to $423/$431 an ounce,
from 427.50/435.50.
 Precious metals prices at 0640 GMT
 Metal             Last    Change  Pct chg  YTD pct chg
Turnover
 Spot Gold         874.85   -1.55   -0.18      5.06
 Spot Silver        16.54   -0.02   -0.12     11.98
 Spot Platinum    1955.00  -31.50   -1.59     28.62
 Spot Palladium    423.00    1.50   +0.36     14.95
 TOCOM Gold       2987.00  -71.00   -2.32     -2.39       
39760
 TOCOM Platinum   6464.00 -289.00   -4.28     21.07       
28700
 TOCOM Silver      567.30  -29.10   -4.88      4.86         
997
 TOCOM Palladium  1458.00  -29.00   -1.95      7.92        
1061
 Euro/Dollar       1.5495
 Dollar/Yen        105.32
                                
    Note - TOCOM prices in yen per gram, except TOCOM silver
which is priced in yen per 10 grams. Spot prices in $ per
ounce.
 (Editing by Michael Urquhart and Louise Heavens)