LONDON (Reuters) - Gold fell more than 4 percent, reflecting losses across the precious metals, as the euro slipped against the dollar, and investors sold bullion to cover losses on other markets.
Silver plunged more than 12 percent in sympathy, while platinum shed over 5 percent to its weakest level since January 2006 after U.S. carmakers reported a fresh drop in auto sales in September.
Spot gold was quoted at $835.60/837.60 an ounce at 1517 GMT, against $868.75 an ounce in late New York trade on Wednesday. Earlier it touched a session low of $829.20, its weakest level since September 19.
"The major driver here is clearly the dollar," said Wolfgang Wrzesniok-Rossbach, head of sales at precious metals trading group Heraeus. Gold moves against the dollar as it is often bought as a hedge against weakness in the currency.
He said the metal was also losing value because some investors were liquidating gold holdings to cover losses on other markets.
"Some would say gold is no longer a safe haven if it reacts like this at a time of financial crisis," he said. "But in fact this is a confirmation that it is a safe haven, because people are now able to liquidate something they have made money on."
Gold is one of the few assets to have gained in value in recent weeks, when most major equity markets and other commodities have posted significant losses.
It hit a two-month high of $920 an ounce on Monday after Congress rejected a $700 billion plan to bail out the beleaguered financial sector.
But the firming dollar has put pressure on gold.
The U.S. currency touched a near 13-month high against the euro after European Central Bank president Jean-Claude Trichet said inflation risks in the euro zone had diminished.
Traders were awaiting the outcome of a vote by the U.S. House of Representatives on a rescue plan for U.S. banks that was approved on Wednesday by the Senate.
Any fresh signs of weakness in the financial system could boost gold's appeal as a haven from risk.
Other precious metals such as silver, platinum and palladium, which have more industrial uses, have suffered losses as traders bet demand will be hit by the global banking crisis.
Spot platinum was quoted at $966.00/986.00 an ounce, its weakest level since January 2006, against $1,020 an ounce in late New York trade on Wednesday.
"Motor vehicle sales in the U.S. came out way below expectations, the lowest since 1993 in terms of a month-on-month increase," said Standard Bank analyst Walter de Wet.
"When the market is illiquid, it is vulnerable to large moves," he added. "Combined with that, we have the dollar which is continuing to strengthen. There is nothing working in favour of platinum group metals at this stage."
Major carmakers reported plunging U.S. sales for September, led by a 34 percent slide at Ford Motor Co. The escalating credit crisis is raising fresh doubts as to when the world's largest car market will stabilise.
Around half the world's annual platinum demand comes from carmakers, who use the metal as a component in autocatalysts.
Among other precious metals, silver plunged to $10.98 an ounce before recovering a touch to trade at $11.21/11.27 an ounce against $12.52, tracking losses in gold.
Palladium dipped 2 percent to $197/207 an ounce from $201.50 an ounce.