Gold ends lower as oil plummets, stocks recover

By Frank Tang and David Sheppard

NEW YORK/LONDON (Reuters) - Gold ended a volatile session lower on Thursday as heavy losses in crude oil hit bullion's inflation appeal and as global stock markets rose on signs of financial stability.

Spot gold was at $962.10/963.10 an ounce by New York's last quote at 2:15 p.m. EDT, against $963.10/964.10 late in New York on Wednesday. It had traded as high as $978.25.

"Crude breaks, stocks rally and we are starting to lose a little luster in gold," said Frank McGhee, head precious metals trader at Integrated Brokerage Services in Chicago.

McGhee said gold's rally last week was driven largely by fears in financial markets, but those worries seemed to have disappeared.

"If the dollar starts firming on the stock rally, then the gold will take a fairly significant letdown," McGhee said.

On Tuesday, gold hit a four-month high of $987.75 an ounce after rallying as investors concerned about the stability of the U.S. financial system sought a safe haven for funds.

"Gold's mainly been tracking oil and the dollar today, having risen largely on banking concerns over the past week," said Standard Chartered trader Tony Dobra.

Gold fell as the dollar erased early losses versus the euro. Gold tends to trade opposite the dollar and in line with oil, as it serves as an alternative asset to the U.S. currency and a hedge against oil-led inflation.