* Gold tumbles over 3 pct on dollar surge, oil drop
* Oil sinks below $125, grains, base metals fall
* Platinum group metals languish amid poor demand outlook
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, July 23 (Reuters) - Gold dove over 3
percent on Wednesday as the dollar surged and crude oil prices
sank, denting the precious metal's alternative investment
appeal.
Oil prices fell below $125 a barrel, soothing some of the
inflation fears that have supported gold, while other
commodities such as grains and base metals also slipped.
HSBC analyst James Steel said a combination of weaker oil
prices, declines in other commodities, an improvement in the
credit market and the belief that the U.S. Federal Reserve may
be focusing more on inflation are all conspiring to push gold
lower.
"Gold has four major things hitting it today so I would be
very surprised, given the way other commodities and financial
markets are moving, if gold wasn't down," he said.
U.S. gold futures for August delivery <GCQ8> settled down
$25.70, or 2.7 percent, at $922.80 an ounce on the COMEX
division of New York Mercantile Exchange. The low was $918.80,
a two-week bottom.
In after-hours electronic trade, the market slid to
$917.80, a level 3.2 percent below the Tuesday close of
$948.50.
Spot gold <XAU=> was at $919.90/921.50 by New York's last
quote at 3:15 p.m. EDT (1915 GMT), down from $948.30/949.90
late in New York on Tuesday, having hit an intraday low of
$917.75 -- its lowest level since July 9.
Crude prices tumbled, giving up more than $4 a barrel and
dropping below $125 a barrel, as concerns eased that Hurricane
Dolly would hit oil installations in the Gulf of Mexico, and
after a rise in U.S. gasoline stocks. [],
[]
The dollar rallied to a two-week high against the euro,
supported by a slide in the oil price and a recovery in risk
appetite. A stronger greenback tends to pressure gold, which is
often bought as an alternative investment to the currency.
[]
Gold usually moves in the same direction as crude, as it is
often bought as a hedge against oil-led inflation.
Investor interest in gold seemed to be softening, with the
amount of gold held to back the SPDR Gold Trust in New York --
the world's biggest gold-backed exchange-traded fund -- falling
2 percent to 690.26 tonnes on Tuesday.
However, gold still has not broken below major support
levels, and it still looked bullish in intermediate- to
long-term charts, said LOGIC Advisors Managing Partner Bill
O'Neill.
PGMs DECLINE
The platinum group metals also posted sharp losses, with
platinum sliding to a 5-1/2 month low and palladium slumping
more than 5 percent, in sympathy with gold and amid fears over
demand from car manufacturers including General Motors and
Toyota.
The precious metal is widely used by the car industry in
catalytic converters. []
Platinum prices in particular have slipped sharply over the
last 10 days, which the noble metal currently trading nearly 25
percent below its March peak of $2,290 an ounce.
However, with output from major producer South Africa --
supplier of 80 percent of the world's platinum -- still
constrained by a power shortage, analysts say the market
remains firmly underpinned, and should not fall too much
further.
Platinum "looks increasingly good value at current levels,"
according to Mitsubishi analyst Tom Kendall.
Spot platinum <XPT=> touched a session low of $1,730.00 an
ounce, its weakest level since Feb. 1, before recovering to
trade at $1,742.50/1,762.50 against $1,800.50/1,820.50 an ounce
late in New York on Tuesday.
Spot palladium <XPD=> dropped to $380.50/388.50 an ounce
from $405.50/413.50 late in New York, having earlier touched an
intraday low of $377.50.
Among other precious metals, spot silver <XAG=> tracked
gold lower to $17.31/17.39 an ounce, against $18.00/18.08 late
in New York on Tuesday.
(Additional reporting by Rene Pastor)
