Fri Feb 22, 2008 3:34pm EST

NEW YORK, Feb 22 (Reuters) - New York gold futures finished
slightly lower amid light volume on Friday, as investors
consolidated recent solid gains ahead of the weekend, but
dealers said bullion still has leg to go higher next week.

 Platinum also dropped as the market took a breather after a breakneck rally. Dealers cited increased platinum and palladium futures margins for lower prices and profit taking.

 "Certainly there are a lot of positive, bullish factors out there for gold, still. But we've had a big run-up recently and there seems to be some profit taking," said Patrick Fearon, precious metals analyst of A.G. Edwards & Sons in St. Louis.

 The gold contract for April delivery at the COMEX division of the New York Mercantile Exchange GCJ8 settled down $1.40 at $947.80 an ounce, trading between $938.10 and $953.00.

 The April contract had scaled a record high of $958.00 on Thursday.

 Fearon said that inflation fears, output decline from top producer South Africa and the expectation of sizable U.S. rate cuts should boost the precious metals.

 "In the past when we've seen bouts of profit taking, sometimes they haven't really lasted very long. There is a pretty good chance that we will still see some upward momentum next week for all the metals," Fearon said.

 A turnaround in crude oil prices helped gold to retrace initial losses. U.S. crude futures CLc1 settled up 58 cents at $98.81 a barrel.

 George Gero, vice president of RBC Capital Markets Global Futures in New York, said pre-weekend position squaring and lower trading volume weighed on precious metals.

 "Profit-taking and margin raises are the topics on the floor," Gero said.

 The dollar also turned slightly higher against the euro after touching a three-week low against the common currency. A higher dollar makes gold more expensive for investors holding other currencies.

 Meanwhile, a steep drop in physical demand due to record bullion prices also hit sentiment. The World Gold Council said India's gold imports in January fell 72 percent from a year ago to around 24 tonnes. [ID:nBOM214704]

 James Steel, metals analyst at HSBC in New York, told clients in a note that credit market problems and the Federal Reserve's lower U.S. growth prospects were supportive to gold.

 COMEX estimated final gold futures volume at 110,453 contracts, while gold options at 28,123 lots. Total turnover in Chicago Board of Trade electronic 100-oz gold futures was 18,509 lots at 2:42 p.m. EST (1942 GMT) here

 At 2:15 p.m., spot gold <XAU=> was quoted at $943.70/944.50, lower than its previous close of $944.40/945.20. London bullion dealers fixed the afternoon spot price at $943.00.

 PLATINUM RETREATS

 Platinum ended lower as higher margins for futures contracts curtailed buying by speculators. The white metal posted solid gains on fund buying the previous session, dealers said.

 The active NYMEX platinum contract for April delivery PLJ8 closed down $20.40 to $2,167.80 an ounce. Spot platinum <XPT=> fetched $2,148/2,153.

 In overnight trade, platinum futures had breached $2,200 an ounce for the first time and had hit a contract high of $2,214.50.

 Dan Smith, metals analyst with Standard Chartered in London, told clients in a note that he expected platinum to remain lofty after 2007, but prices should ease somewhat due to energy saving measures in South Africa and softening demand.

 "Platinum demand growth is also likely to be weak this year, which will help to offset some of the tightness in the physical market," citing weak autocatalyst demand due to poor global vehicle sales, Smith said.

 Sister-metal palladium reversed initial losses to end higher. The NYMEX March contract PAH8 settled up 35 cents to end at $515.85 an ounce. Spot palladium <XPD=> fetched $498.00/503.00.

 COMEX March silver SIH8 finished up 8.5 cents to $18.035 an ounce, trading between $17.740 and $18.195 -- which marked a contract high.

 Spot silver <XAG=> was at $17.97/18.02 compared with its last previous finish of $17.84/17.89. London silver was fixed at $17.94.  (Reporting by Frank Tang; Editing by Marguerita Choy)