* Gold drops as on signs of financial markets recovery
* Weaker crude oil prices also weigh on bullion
* Platinum extends slide as supply fears recede
(Recasts, updates with quotes, closing prices, market
activity, adds NEW YORK to dateline)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, July 18 (Reuters) - Gold retraced from its
session lows but still ended 1 percent lower on Friday, as
signs of stability in financial markets reduced bullion's
safe-haven appeal in times of market turmoil.
Spot gold <XAU=> was at $955.45/957.05 by New York's last
quote at 2:15 p.m. from $962.10/963.10 an ounce late in New
York on Thursday, having earlier slipped as low as $949.50 an
ounce.
The precious metal slipped to a one-week low in early
afternoon trade after better-than-expected earnings from
leading U.S. bank Citigroup boosted the dollar and sent equity
markets higher in Europe.
In addition, signs of resiliency in the financial markets
also dent gold's status as a safe haven.
"The key reason why we have lower metals in the last couple
of days is because of less flight-to-safety buying and a better
atmosphere surrounding the financial system," said Bill
O'Neill, managing partner of LOGIC Advisors in New Jersey.
U.S. gold contract for August delivery <GCQ8> settled down
$12.70, or 1.3 percent, at $958 an ounce on the COMEX division
of New York Mercantile Exchange.
In early trading, U.S. stocks dipped as the market reacted
to disappointing earnings from Microsoft <MSFT.O> and Google
<GOOG.O> released after the bell on Thursday. This boosted
interest gold as an alternative investment to equities.
"In the last few weeks, where the equity markets started to
tumble, gold has started to shoot up, so there has been a good
link," said Standard Chartered analyst Dan Smith.
The dollar also came off highs against the euro, having
rallied against a basket of currencies earlier in the session
after the Citigroup news. []
Gold tends to benefit from a weaker dollar, as it is often
bought as a hedge against currency weakness.
The other main external driver of gold, oil, was
lacklustre. New York crude futures have dropped around 12
percent from the record high of $147.27 they hit at the end of
last week, despite a small bounce on Friday []
before it eventually closed lower.
Weaker oil prices tend to drag gold lower, both because the
precious metal is often bought as an inflation hedge and
because softer crude can weaken interest in commodities as a
whole.
PLATINUM SLIDES
Spot platinum <XPT=> slipped on Friday for a fifth
successive day, after supply fears linked to an electricity
shortage in South Africa receded.
An electricity shortage in South Africa, which produces
four out of five ounces of global platinum supply, sent the
white metal to an all-time high of $2,290 an ounce in March as
investors worried about the outlook for production.
However, with supply fears receding, traders are switching
their attention to the demand picture.
Prices have fallen around $170 an ounce, or 8.5 percent,
from late last Friday as the market factors in a weaker picture
for the U.S. auto market this year.
Platinum is a major component in autocatalysts, and any
reduction in car manufacturing is likely to weaken demand.
"From both a demand and supply perspective, the fundamental
picture has turned more bearish than was the case in (the first
half of) 2008," said Standard Bank analyst Walter de Wet in a
note from Johannesburg
.
Spot platinum fell to $1,846.00/1,866.00 an ounce from
$1,881.00/1,901.00 late in New York on Thursday, having hit a
session low of $1,836.50, its weakest level since May 2.
Among other precious metals, spot palladium <XPD=> slipped
to $411.50/419.50 an ounce from $420.00/428.00 an ounce, while
silver <XAG=> edged down to $18.07/18.13 an ounce from
$18.39/18.48 late in New York on Thursday.
