SINGAPORE (Reuters) - Gold fell 2 percent on Thursday, ending a two-day rally as a renewed dive in share markets forced bullion selling and a deeper slump in oil prices reduced its appeal as an inflation hedge.
Gold, often viewed as a safe haven in turbulent times, defied Wednesday's broad commodities and stock market sell-off, but was swept up in fresh losses on Thursday as Japan's Nikkei tumbled 11 percent, copper slumped 7 percent and oil shed more than $2.
"Every commodity is falling. I think it's much better to keep more cash on hand. The market is so uncertain," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
Gold traded at $832.50 an ounce, down $15.50 from New York's notional close on Wednesday, when it gained 1 percent amid losses in stock markets.
"In the past, we would expect to see gold move up when stock markets tumbled, but this is not the case anymore. People think some of the financial institutions have to liquidate their long positions to cover losses," a dealer in Hong Kong said.
"Some of the funds are not doing very well. Technically, it's difficult to say where the market is heading but $850 and $860 are still good resistance levels," he said.
Platinum fell 4 percent to its lowest in 3 years on fears of falling demand for autocalysts after J.D. Power and Associates pegged October sales on track for a 17-year low with a sales rate below 12 million units.
Darren Heathcote of Investec Austarlia in Sydney also said traders were probably selling gold to meet margin calls, but reckoned another wave of buying was possible if markets calmed.
"But one could expect that if the market calms again in the next couple of days, we might get a slight push up again," said Heathcote, who pegged resistance at $900 -- a level last seen earlier this month.
Gold's volatility has spooked jewellers and some investors. It hit a two-month high of $931 on Friday on a weak dollar before tumbling all the way to $823.50 on the same day as investors sought cash to cover margin calls.
Gold was well below a record of $1,030.80 hit in March, when investors and funds poured money into the metal on fears of rising energy costs and uncertainties in the dollar's outlook.
Shares across the world plunged on Thursday as investors came to grips with the fact that a sharp global slowdown had swiftly replaced bank collapses as their biggest fear. The MSCI World stock index fell 3.8 percent.
Oil fell for a third day to a new 13-month low near $73 a barrel on Thursday on worries that a deepening economic slowdown will cut into already weakening demand.
Platinum plunged for a second day, falling $42.00 an ounce to $913.00, a three-year low amid fears that a global recession would do even more damage to new car sales, reducing demand for the metal for use in autocalysts to clean exhaust fumes.
