London: Bullion prices slipped sharply yesterday, with gold touching a one-month low and silver sliding to its weakest level in more than two years, as losses on the equity markets triggered a sell-off in commodities. Platinum, palladium and rhodium prices also tumbled, extending sharp losses, as investors sold the metal on fears the US economy could be facing recession and demand would plunge. A broad sell-off of commodities saw declines in crude oil, copper, aluminium, cocoa and grains. Spot gold fell to a session low of $792.50 (Dh2,908.47) an ounce, before bouncing back to $801.10/804.10 at 1443GMT, against $848 in late New York trade on Wednesday. Silver reached a low of $9.50 an ounce before recovering to trade at $9.64/9.72 against $10.23. Losses on other markets and relative strength in the US dollar are pressuring gold. "What we're seeing in the overall global economy is deflationary," said Tom Hartmann, a trader at Altavest. Deflationary "Commodity prices are going down, and the dollar's rallying. Gold doesn't do very well in a deflationary environment." US stocks were choppy in early trade, bouncing at the open but slipping after the Philadelphia Federal Reserve Bank said its business activity index slumped unexpectedly in September. "Markets generally are just selling off. It is that, as much as anything else, that gold is being caught up in," said Stephen Briggs, an analyst at RBS Global Banking & Markets. "People need to liquidate assets to cover losses elsewhere." The dollar was firmer against the euro as risk-averse investors sought safety, despite dipping against the single currency after the release of the Philly Fed survey. A stronger dollar typically weighs on gold, which is often bought as an alternative investment to the US currency. Weaker oil prices, which tumbled more than $2, are also undermining gold's appeal as an inflation hedge. The market is now awaiting fresh moves from governments and central banks to address the credit crisis. Traders say they expect more rate cuts from the US Federal Reserve. While in the long term any economic stimulation is likely to pressure gold, analysts say in the short run it would boost the appeal of non-interest bearing assets like bullion. Precious metals Among other precious metals, platinum plummeted and palladium slipped as investors feared a recession could cut demand for the metals, primarily used in catalytic converters. Rhodium, which has similar applications, also fell, and has plummeted since Tuesday. "Car sales in Europe were down 8.2 per cent year on year in September," said Commerzbank in a research note. "Moreover, industry consultant JD Powers is expecting US car sales to hit their lowest level for 17 years this month, and also sees demand in China cooling off considerably." Investec downgraded its price forecasts for the platinum group metals, citing poor demand among other factors. It slashed its platinum forecasts by 14 per cent in 2008 and 32 per cent in 2009, to $1,629 an ounce and $1,350 an ounce respectively. It cut its 2008 rhodium forecast by 19 per cent to $7,123 and its 2009 forecast by a quarter to $5,625. It also said it now sees palladium at $368 this year and $318 in 2009, having downgraded its forecasts 9 per cent and 21 per cent respectively. Spot platinum slipped nearly 8 per cent to $882/902 an ounce from $955 late in New York on Wednesday, while palladium fell nearly 13 per cent to $165, before recovering to $168/178 from $189.

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