By Jan Harvey of Reuters LONDON - Platinum and palladium recovered sharply from losses that took them to three and a half month lows, but are still on track for their biggest weekly percentage loss since late 2008 due to fund selling. Gold was steadier, arresting a slide that took it to two-week lows earlier in the session, as lower prices tempted some buyers back to the market amid persistent fears over the euro zone debt crisis. Spot gold was bid at $US1,177.55 ($A1,426.30) an ounce at 1450 GMT (2450 AEST), against $US1,181.10 late in New York on Thursday. US gold futures for June delivery on the COMEX division of the New York Mercantile Exchange fell $US10.4 to $US1,178.10 an ounce. Platinum was at $US1,500.50 an ounce against $US1,509 after earlier falling around 15 per cent from last Friday's level. Palladium was at $US431.25 versus $US412.75, after falling to $US393, down 25 per cent on the week. "Risk aversion and fears of contagion have weighed on the PGMs alongside the rest of commodities complex," Barclays analyst Suki Cooper said, but added that from a fundamental point of view there has been positive news flow. "Johnson Matthey painted a picture where we had platinum closer to balance in 2010 compared to 2009 and they did highlight they expect a surplus in palladium smaller than last year as well," she said. In its closely watched Platinum 2010 report, platinum refiner and specialist Johnson Matthey Plc said it expects demand to strengthen as global auto production recovers this year and again in 2011. Gold prices recovered after earlier falling to a low of $US1,166.50 an ounce, down more than five per cent from last Friday. Traders say prices are due a period of consolidation after rising six per cent in the first two weeks of May to record highs at $US1,248.95 an ounce. "We traded up from $US1,125 to the high at $US1,248 not even in a month, so it is quite normal that you have a movement against that," Commerzbank trader Michael Kempinski said. "There is really too much investor money in there, and the funds are not all interested in the long term performance." Sovereign debt Fear remains a driving force in the market. The VIX index, Wall Street's chief measure of volatility, closed at its highest since March 2009 on Thursday on growing fears over the euro zone's handling of its sovereign debt problems. European shares hit their lowest in over eight months on Friday. The euro clung to gains against the dollar as fears of currency intervention rose. Oil prices fell below $US70 a barrel, having touched their lowest since July on Thursday. Investment demand for physical gold continued to be firm. Holdings of the world's largest gold-backed exchange-traded fund, New York's SPDR Gold Trust, hit a record 1,220.152 tonnes on Thursday. The gold exchange-traded products operated by London's ETF Securities were also little changed on Thursday. The resilience of ETF holdings during gold's latest leg lower has cheered investors who believe the longer-term outlook for the metal against a backdrop of volatility in the wider markets and rising fears over euro zone debt levels is positive. "My view is still that in a period of strong monetisation by governments, it will come out as the only real store of value," Bullman Asset Management managing director Nick Bullman said. Silver was bid at $US17.70 an ounce against $US17.59.

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