* Dollar retreats after hitting two-year high vs euro * Oil slides more than $2 a barrel on demand fears * Platinum slips sharply as firm dollar adds to demand fears (Releads, updates prices, adds comment) By Jan Harvey LONDON, Oct 27 (Reuters) - Gold pared losses on Monday as the dollar retreated from highs against the euro, but strength in the U.S. currency is likely to keep the metal under pressure. Gold slipped more than 3 percent to a session low of $706.10 earlier as the surging dollar dented the precious metal's appeal as an inflation hedge, and weakness on the equity markets prompted selling of gold to meet margin calls. Spot gold had recovered to $726.30/728.30 an ounce at 1425 GMT, but was still down from $733.30 an ounce in New York late on Friday. In times of turmoil gold is often seen as a stable investment, but risk-averse buyers are increasingly choosing cash, especially the dollar and yen, as a haven from risk. "Gold hasn't really had any safe haven attraction because the dollar has held up well," said Fairfax analyst Marc Elliott. "Unless the dollar weakens significantly, there is no near-term likelihood for gold to perform." The dollar rose on Monday to a two-year high against the euro, before paring gains in later trade. European shares also recovered after hitting 5-1/2 year lows, echoing a slide in Asia prompted by a surging yen, as investors feared a flurry of Central Bank action would fail to ward off a global recession. [ID:nLR144116] Gold has come under pressure as funds liquidate their bullion holdings to cover losses elsewhere. Traders are now turning their attention to the two-day meeting of the U.S. Federal Reserve Open Market committee on interest rates beginning on Tuesday. The FOMC is expected to cut overnight lending rates by 50 basis points in response to financial turmoil. With the economic outlook still murky, gold is expected to remain unsettled. VOLATILE "Volatile movement in precious metals is expected in the coming week as a result of instability in the financial market coupled with strengthening of dollar against euro," said research group Epitome Global Services in a note. "But, gold is expected to see some buying due to the ongoing festive season in India, the largest consumer of gold," it said. Good demand for gold jewellery was seen over the weekend in India, the world's largest gold market, due to the Dhanteras festival on Sunday. However, sales are expected to slow after Diwali on Tuesday, traders said. [ID:nBOM388627] Traders are also worried about the prospect of gold sales by exchange-traded funds. ETFs, which issue securities backed by physical bullion, are major holders of gold. The UK's ETF Securities said it saw an outflow of 117,000 ounces of gold from its Physical Gold exchange-traded commodity last week. [ID:nLR344433] Among other precious metals, platinum tumbled almost 7 percent to a session low of $732.50 as the firmer dollar added to fears over weakening demand from carmakers, who account for around half of global platinum consumption. "We view the price slump of platinum metals as a huge exaggeration, which is set to continue on the back of the persisting inflow of bad news from the automobile industry," said Commerzbank in a research note. Spot platinum later recovered to trade at $750.50/780.50 an ounce against $788.50 in New York late on Friday. Its sister metal palladium edged down to $164.50/174.50 an ounce from $167. Silver tumbled in line with gold, shedding more than 6 percent to its session low of $8.70 an ounce, before recovering to trade at $8.98/9.08 against $9.30 an ounce.

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