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Gold slips 2 pct as equity slide sparks selling

LONDON - Gold slipped nearly 2 percent on Friday after earlier touching a 2-1/2 month high as a slide in the global equity markets sparked a broad-based commodities sell-off. Platinum, palladium and silver all tumbled, reflecting losses in crude oil, industrial metals, sugar and grains, as European and U.S. stock markets posted huge losses.

Spot gold was quoted at $897.00/901.00 an ounce at 1436 GMT against $911.50 an ounce late in New York on Thursday. Earlier it touched a session low of $887.95 an ounce.

Gold has been underpinned in recent weeks by interest in bullion as a haven from risk as markets descended into chaos. But that has not been enough to support it as losses have intensified.

"The flight to quality into gold and possibly silver is not necessarily a valid approach to the market right now," said Alan Plaugmann, head of futures and options at Saxo Bank.

"The majority of people are favouring cash and fixed income over pretty much any other asset class out there."

The dollar benefitted from the market turmoil, hitting a 14-month high against a basket of currencies as investors sold emerging market stocks and rushed back to the relative safety of the U.S. currency.

U.S. stocks fell sharply at the open, with the Dow sinking as much as 8 percent, but recovered as traders perceived the slide as overdone.

European stocks dived more than 7 percent by midday, swept up in a global sell-off, as investors worried concerted efforts from governments and central banks to stabilise the financial markets would fail to avert recession.

Turmoil on the equity markets sparked a broad-based sell-off of commodities. Crude futures fell more than $7 to hit a one-year low as fears that economic turmoil would cut demand.

Industrial metals such as copper and aluminium slid and agricultural commodities all tumbled.

India selling

Recent prices rises have caused some selling in India, the world's largest gold market, ahead of this month's Hindu festivals.

"There are a lot of sellers today, mainly holders of small quantities of jewellery and bars," Jitendra Kantilal, a partner at bullion dealer Jugraj Kantilal & Co, told Reuters.

Nonetheless, investment demand has been firm. The world's largest bullion-backed ETF, New York's SPDR Gold Trust, said its holdings rose to a record 765.74 tonnes on Thursday as investors sought a haven from risk.

Among other precious metals, silver was quoted at $11.70/11.80 against $12.01 late in New York on Thursday, having earlier touched a low of $11.22.

The platinum group metals tumbled, tracking losses in the industrial metals. Spot platinum was trading at $990/1,014 an ounce against $1,018.50. Earlier it fell 3 percent to an intraday low of $982.

Its sister metal palladium fell to $189.50/199.50 from $198, having earlier touched a session low of $184.50, its weakest level since October 2005.

Both PGMs have suffered from fears over falling demand from carmakers, who account for around half of global consumption.