Gold slipped with stock markets and other commodities on Tuesday as fears about the effect of a global credit squeezed lingered, analysts said.

Oil, industrial metals and share prices were all lower, while gold's traditional appeal as a safe haven in times of economic trouble has waned.

The development of the gold price today will depend again to a large extent on the movements in global stock markets, analysts at Dresdner Kleinwort said in a market report.

By 6:07 a.m. EDT, spot gold was quoted at $655.50/656.10 per ounce, down from $657.60/658.20 late in New York on Monday, when it gained more than $2 an ounce on a weaker dollar.

At its current level, gold is around 3 percent up since the start of the year, but down 5 percent from its April high.

The FTSE share index was down 0.2 percent, London Metal Exchange copper futures were 0.6 percent down and U.S. crude oil

fell 43 cents to $70.69 per barrel.

Markets have been battered over the past month by worries about financial instability following trouble with risky U.S. mortgages and a squeeze on credit.

Fears of a global liquidity crisis ignited a broad sell-off in financial markets last week that spilled into commodities and sent gold to a 7-week low of $641.10 on Thursday -- a sign that safe-haven gold was now behaving much like other assets.

Investors sold gold for cash to cover margin calls on losses arising from a meltdown in the U.S. subprime mortgage market, the repercussions of which are still being felt despite United States central bank intervention.

The Fed move last Friday has calmed markets, but concerns about the fall-out of the sub-prime mortgage crisis are still in the markets. The US dollar has pared some of the losses against the euro, which also limits the upside for gold, Dresdner said.

The increasing popularity of low-risk securities would ultimately boost gold's attractiveness, John Reade, Head of Metals Strategy at UBS said.

In this environment we believe there is a meaningful chance that gold will attract the safe haven bid that has been so far mostly absent during the credit crunch, he said in a note.

Dealers also noted growing interest in gold as a portfolio diversifier, reflected by a surge in the amount of bullion used to back gold exchanged-traded funds.

Data showed that gold held by StreetTRACKS Gold Shares, the world's largest bullion ETF by far, was at a record high of 514.21 tonnes.

The U.S. Federal Reserve turned near-panicky financial markets around on Friday by cutting 50 basis points off the primary discount rate at which banks borrow from the U.S. central bank. This now stands at 5.75 percent.

More than half the primary dealer banks polled by Reuters predict the Federal Open Market Committee will lower Fed funds, its primary monetary tool, at a September 18 meeting or even before.

Investors also awaited a meeting between Fed Chairman Ben Bernanke, Treasury Secretary Henry Paulson and Senate Banking Committee Chairman Chris Dodd on Tuesday at which they will discuss conditions in financial markets.

Platinum slipped to $1,237/1,241 an ounce by 5:57 a.m. EDT from


South Africa's National Union of Mineworkers said 26,000 of its members at platinum producer Lonmin's mines were on strike over a pay dispute.

Palladium fell to $322/326 from $328/331 an ounce.

Silver fell to $11.60/11.64 an ounce from $11.73/12.76 an ounce.

(Additional reporting by Lewa Pardomuan in Singapore)