UPDATE 6-Gold ends lower as global market fears lessen

* Gold drops as on signs of financial markets recovery

* Weaker crude oil prices also weigh on bullion

* Platinum extends slide as supply fears recede (Recasts, updates with quotes, closing prices, market activity, adds NEW YORK to dateline)

NEW YORK/LONDON, July 18 (Reuters) - Gold retraced from its session lows but still ended 1 percent lower on Friday, as signs of stability in financial markets reduced bullion’s safe-haven appeal in times of market turmoil.

Spot gold XAU= was at $955.45/957.05 by New York's last quote at 2:15 p.m. from $962.10/963.10 an ounce late in New York on Thursday, having earlier slipped as low as $949.50 an ounce.

The precious metal slipped to a one-week low in early afternoon trade after better-than-expected earnings from leading U.S. bank Citigroup boosted the dollar and sent equity markets higher in Europe.

In addition, signs of resiliency in the financial markets also dent gold’s status as a safe haven.

“The key reason why we have lower metals in the last couple of days is because of less flight-to-safety buying and a better atmosphere surrounding the financial system,” said Bill O’Neill, managing partner of LOGIC Advisors in New Jersey.

U.S. gold contract for August delivery GCQ8 settled down $12.70, or 1.3 percent, at $958 an ounce on the COMEX division of New York Mercantile Exchange.

In early trading, U.S. stocks dipped as the market reacted to disappointing earnings from Microsoft MSFT.O and Google GOOG.O released after the bell on Thursday. This boosted interest gold as an alternative investment to equities.

“In the last few weeks, where the equity markets started to tumble, gold has started to shoot up, so there has been a good link,” said Standard Chartered analyst Dan Smith.

The dollar also came off highs against the euro, having rallied against a basket of currencies earlier in the session after the Citigroup news. [ID:nN18308493]

Gold tends to benefit from a weaker dollar, as it is often bought as a hedge against currency weakness.

The other main external driver of gold, oil, was lacklustre. New York crude futures have dropped around 12 percent from the record high of $147.27 they hit at the end of last week, despite a small bounce on Friday [ID:nSP180848] before it eventually closed lower.

Weaker oil prices tend to drag gold lower, both because the precious metal is often bought as an inflation hedge and because softer crude can weaken interest in commodities as a whole.


Spot platinum XPT= slipped on Friday for a fifth successive day, after supply fears linked to an electricity shortage in South Africa receded.

An electricity shortage in South Africa, which produces four out of five ounces of global platinum supply, sent the white metal to an all-time high of $2,290 an ounce in March as investors worried about the outlook for production.

However, with supply fears receding, traders are switching their attention to the demand picture.

Prices have fallen around $170 an ounce, or 8.5 percent, from late last Friday as the market factors in a weaker picture for the U.S. auto market this year.

Platinum is a major component in autocatalysts, and any reduction in car manufacturing is likely to weaken demand.

“From both a demand and supply perspective, the fundamental picture has turned more bearish than was the case in (the first half of) 2008,” said Standard Bank analyst Walter de Wet in a note from Johannesburg .

Spot platinum fell to $1,846.00/1,866.00 an ounce from $1,881.00/1,901.00 late in New York on Thursday, having hit a session low of $1,836.50, its weakest level since May 2.

Among other precious metals, spot palladium XPD= slipped to $411.50/419.50 an ounce from $420.00/428.00 an ounce, while silver XAG= edged down to $18.07/18.13 an ounce from $18.39/18.48 late in New York on Thursday.