By Lewa Pardomuan SINGAPORE (Reuters) - Gold dropped as much as 1percent on Friday, having posted its biggest daily percentage increase in more than a month this week, as equities extended losses on escalating worries about a global recession. But lower prices attracted buying from jewellers and retail investors in Asia, which could stem more losses after falling equities drove funds to cash in to cover margin calls. Gold was nearly 30 percent below a record high above $1,000 hit in March. Gold was trading at $731.95 an ounce, down $1.00 an ounce from New York's notional close on Thursday, when it moved in a $19 range to hit a session high of $760 an ounce before retreating. "We are now at a lower range. I believe there's a lot of demand from short-term speculators around the $700 to $720 level. They might be accumulating (gold) slowly," said William Kwan, bullion director of Gold Capital Management. "A lot of people are still buying gold coins. Retail investors are very happy to buy gold at these levels," he said. Gold has gained as much as 6.2 percent this week to hit a session high of $768. It was still down from a two-month high of $931 hit in October but significantly higher than a 13-month low of $680.80 also struck last month. In the physical front, premiums for gold bars were steady between $1.5 to $2 an ounce to the spot London prices in Singapore. Premiums were also stable in Hong Kong at betwen $2 and $3 an ounce. "It's cooling off a little but physical demand has been very good in the past two weeks. Demand is so good in Thailand that we've seen streams of people buying gold at jewellery shops in Chinatown," said a dealer in Singapore. "We also heard many people crossed over to Thailand from Cambodia, Laos and Vietnam to buy jewellery," he said. Despite buying on dips from consumers, gold was struggling to revisit March's record at $1,030.80, partly blamed on a slump in the equities markets that forced investors to cash in to make good losses. The Nikkei average slid 4.4 percent on Friday, with exporters tumbling on a firmer Japanese yen and fears of a deepening economic downturn. Recession fears sent oil prices to below $60 a barrel for the first time in 20 months on Friday before rebounding. In theory, weaker oil prices reduced gold's appeal as a hedge against inflation. "Gold has been moving in a narrow range of $725 to $750 because stock prices fluctuate. There's a rush of actual buying by many Japanese investors," said Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo. "Buying is very very strong in Japan at this moment," he said. In currencies, the euro and sterling fell due to a drop in risk appetite and as investors braced for the European Central Bank and the Bank of England to lower interest rates further. Platinum was trading at $816.00 ounce, down $10.50 from New York's notional close on Thursday. New York gold futures fell $0.2 an ounce to $732.8.

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