UPDATE 3-Gold hits 2-week low on weak oil; platinum sheds gains

* Gold drops as oil prices fall, dollar steady

* Platinum hits 5-month low

* Tokyo gold below 25-year high
(Recasts, adds activity in physical market)

By Lewa Pardomuan

SINGAPORE, July 23 (Reuters) - Gold dropped to its weakest
in two weeks on Wednesday as oil extended losses and robbed the
metal of some of its appeal as a hedge against inflation, while
platinum failed to sustain early gains amid demand fears.

Gold was also weighed by the U.S. dollar, which held much
of its gains, and rising stock markets, which in theory reduce
bullion's appeal as an alternative investment.

Gold XAU= dropped to $940.75/948.00 an ounce from
$948.30/949.90 late in New York on Tuesday, having hit an
intraday low of $939.20 -- its lowest level since July 10.

Overnight gains in U.S. stocks and a rise in Japan's Nikkei
share average .N225 encouraged some investors to put their
money back into shares and put pressure on bullion, said
Kazuhiko Saito of Interes Capital Management in Tokyo.

"There's a shift from the gold market to stocks," said
Saito, who pegged support at $920 an ounce.

Oil CLc1 wasdown 69 cents at $128.73 a barrel after
falling more than $3 to a six-week low in the previous session
as the threat of Hurricane Dolly to oil drillers andrefiners
eased, and concerns over faltering U.S. energy demandincreased.
[O/R]

The euro was barely changed at $1.5785 EUR=. The dollar
gained after Philadelphia Federal Reserve President Charles
Plosser said rising inflation could force the Fed to start
raising rates. [ID:nN22196417]

"I am not sure whether the adjustment overnight is going to
have a big impact in terms of attracting what you might call
bargain buying," said David Moore, analyst at Commonwealth Bank
of Australia in Sydney.

"You've got to remember that it was only a couple of weeks
ago that gold was actually even lower than current levels."

Gold prices have been volatile since hitting a lifetime
high of $1,030.80 an ounce in March. It fell to a four-month
low of $845 an ounce in May because of a recovery in the
dollar.

Spot platinum XPT= hit a high of $1,825 an ounce before
falling to $1,791 an ounce, its lowest level since early
February. That was down from $1,800.50/1,820.50 an ounce in New
York.

Purchases from automakers and platinum jewellers helped
stir up physical trading in Asia but low volume suggested most
consumers expected a further correction to levels seen early
this year. [ID:nSP96569]

Platinum has lost more than 20 percent in value since it
spiked to a lifetime high of $2,290 in March as sentiment
turned bearish after a slowing U.S. economy sparked fears of
falling demand for cars.

Gold futures for August delivery GCQ8 on the COMEX
division of the New York Mercantile Exchange fell $7.7 to
$940.80 an ounce.

The most active Tokyo gold contract for June 2009 delivery
<0#JPL:> on the Tokyo Commodity Exchange fell 76 yen per gram
to 3,285 yen, having hit a 25-year high of 3,363 yen on
Tuesday.

Spot palladium XPD= dropped to $392.00/400.00 an ounce
from $405.50/413.50 late in New York. Silver XAG= edged down
to $17.75/17.81 an ounce from $18.00/18.08 late in New York.
Precious metals prices at 0654 GMT
Metal Last Change Pct chg YTD pct chg
Turnover
Spot Gold 939.20 -5.80 -0.61 12.79
Spot Silver 17.73 -0.20 -1.12 20.04
Spot Platinum 1792.50 -6.00 -0.33 17.93
Spot Palladium 392.00 -10.50 -2.61 6.52
TOCOM Gold 3284.00 -77.00 -2.29 7.32
48434
TOCOM Platinum 6158.00 -203.00 -3.19 15.34
27905
TOCOM Silver 620.70 -23.70 -3.68 14.73
1185
TOCOM Palladium 1390.00 -89.00 -6.02 2.89
2794
Euro/Dollar 1.5767
Dollar/Yen 107.76
TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
(Additional reporting by Chikafumi Hodo; Editing by Michael
Urquhart)