LONDON, Oct 9 (Reuters) - Gold slipped on Thursday as investors cashed in gains that took the metal to a nine-day high in the previous session, with a recovery in equity markets attracting investment back to stocks.
Platinum climbed, however, mirroring a recovery in many industrial metals, as a steadier outlook for the financial sector relieved downward pressure on the metal.
Spot gold was quoted at $887.60/890.10 at 1329 GMT, down from $906.50 in late New York trade on Wednesday. Earlier it touched a session low of $877.65.
"There are still a lot of speculative positions in the market and some banks are taking profit to make up losses on other markets," Commerzbank senior trader Michael Kempinski said.
An uptick in equities is pressuring gold. European stocks were higher at midday, breaking a three-session losing streak, after fresh government and central bank action to combat the financial crisis. [ID:nL9510395]
U.S. stock index futures also rose as stronger-than-expected financial results from IBM cheered the market. [ID:nN09285070]
A group of major central banks including the Federal Reserve and European Central Bank cut interest rates by 50 basis points on Wednesday, with South Korea, Hong Kong and Taiwan making cuts of their own early on Thursday.
Investors have been pulling cash out of stocks and shares in favour of so-called safer assets like bullion in recent weeks as the financial crisis has unfolded. A reversal of that trend is likely to lead to a correction in gold prices, analysts say.
The main external drivers of gold -- the dollar and crude oil -- were largely steady. Oil prices stabilised just below $90 a barrel after several days of losses. [ID:nSP359316]
The dollar slipped a touch against the euro, but rose against the yen. [ID:nL9489179]
With financial market turmoil driving the gold market at present, these influences are taking a back seat, traders said.
"Gold is trading pretty independently at the moment, which it hasn't done for a long time," said Deutsche Bank trader Michael Blumenroth.
FUNDAMENTALS SUPPORT
Aside from its value as a financial instrument, gold is also supported by firm fundamentals.
South African gold output fell 23.2 percent year-on-year in August, Statistics South Africa said in a report. The republic has been plagued by power problems since the near-collapse of its electricity grid in January. [ID:nWEA2170]
South Africa is the world's second largest gold producer after China.
Strong buying of physical gold by institutional and smaller investors is still likely to support bullion, with some European countries seeing unusually high demand for investment produsts such as coins and bars.
"There is very big demand from private customers, especially in Germany and Luxembourg... for coins and bars," said Kempinski. "There is a lot of safe-haven buying. Everyone is looking for delivery of physical gold."
Buying of gold exchange-traded funds -- which issue securities backed by physical gold -- has been particularly strong. The world's largest bullion-backed ETF, SPDR Gold Trust, said its holdings rose to a record high on Wednesday.
Spot silver was trading at $11.63/11.70 an ounce against $11.70 an ounce in late New York trade on Wednesday.
Among other precious metals, platinum rose to $1,017.50/1,041.50 an ounce from $990.50, while palladium edged up to $198/208 from $192.50.
"The platinum group metals are up around 2 percent and are definitely trading more as industrial metals than as investor metals," said JP Morgan analyst Michael Jansen in a note.
