* Investors take profits as world leaders mull action
* Gold option trading subdued as VIX retreats
* Markets monitor Israeli ground offensive in Gaza
* Coming up: U.S. June consumer prices on Tuesday
(Updates market activities)
By Frank Tang and Clara Denina
NEW YORK/LONDON, July 18 Profit-taking sent gold
prices lower on Friday after they rallied the previous day on
the shooting down of a passenger plane in eastern Ukraine, but
traders said interest in bullion will be quick to rise again if
geopolitical tensions heighten.
Gold, seen as a hedge against risk in times of uncertainty,
jumped 1.5 percent on Thursday as investors bought back their
bearish bets in the metal and sought shelter from further
turmoil in equities after a Malaysian airliner over Ukraine was
On Friday, no concrete measures had yet been taken by world
leaders even though they called for a rapid investigation of the
jetliner's downing and justice for nearly 300 deaths in an
incident that could mark a pivotal moment in deteriorating
relations between Russia and the West.
"Gold's selling off because it doesn't seem like the
situation is escalating yet," said Phillip Streible, senior
commodities broker at RJ O'Brien in Chicago.
"But gold prices could definitely shoot up if geopolitical
tensions rise further because of this," he said.
Analysts said bullion prices should also benefit from
Israel's intensifying ground offensive into Gaza against Hamas
militants who fired hundreds of rockets into Israel.
Spot gold was down 0.6 percent to $1,309.87 an ounce
at 3:16 p.m. EDT (1916 GMT) after rising 1.5 percent on
Thursday, its biggest gain in a month.
U.S. gold futures for August delivery settled down
$7.50 at $1,309.40 an ounce, with trading volume about 10
percent below its 30-day average, preliminary Reuters data
The CBOE volatility index, or the VIX, known as the "fear
gauge," which measures the short-term volatility of S&P 500
stock index options, fell sharply on Friday after posting its
biggest one-day gain since April 2013.
However, interest in gold options was limited and option
volatility rose only slightly despite Thursday's sudden rally,
said COMEX options floor trader Jonathan Jossen.
The price of gold rose as high as $1,392 in late March at
the height of the conflict between Ukraine and pro-Russian
forces in Crimea, but bullion's rally failed to follow through
despite continued conflict in eastern Ukraine and heightened
tensions in the Middle East.
Among other precious metals, platinum was down 0.6
percent at $1,483.25 an ounce, while silver fell 1.1
percent to $20.82 an ounce, having gained almost 2 percent on
Palladium fell 0.3 percent to $878 an ounce, but
remained near its highest since 2001, after the United States
imposed its toughest sanctions yet on Russia, the biggest
producer of the metal, over the violence in Ukraine.
3:16 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold AUG 1309.40 -7.50 -0.6 1305.00 1325.50 113,592
US Silver SEP 20.886 -0.248 -1.2 20.780 21.315 32,970
US Plat OCT 1489.90 -13.80 -0.9 1487.80 1510.00 6,826
US Pall SEP 881.50 -3.60 -0.4 870.10 887.55 3,306
Gold 1309.87 -7.43 -0.6 1304.70 1324.44
Silver 20.820 -0.240 -1.1 20.750 21.240
Platinum 1483.25 -9.45 -0.6 1486.00 1503.00
Palladium 878.00 -3.00 -0.3 874.50 885.05
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 135,682 152,523 166,430 14.15 -0.15
US Silver 34,343 64,927 54,740 19.95 1.29
US Platinum 6,850 14,779 12,277 14.43 0.53
US Palladium 3,419 4,457 5,822 18.47 0.27
(Additional reporting by A. Ananthalakshmi in Singapore;
Editing by William Hardy, David Holmes and Peter Galloway)