* Platinum dips for seventh session out of eight
* Traders fear Volkswagen (XETRA:VOWG) scandal could hit auto demand
* Gold extends losses to third day
(Adds comment, byline, NEW YORK dateline; updates prices)
By Luc Cohen and Jan Harvey
NEW YORK/LONDON, Sept 29 (Reuters) - Platinum prices fell
below $900 an ounce on Tuesday for the first time since January
2009, hurt by fears that the Volkswagen emissions scandal would
cut demand from carmakers, but later pared losses as
bargain-hunting investors swooped in.
The metal has been hit by last week's revelations that
Volkswagen AG VOWG_p.DE falsified U.S. vehicle emission tests,
which some believe could affect demand for diesel cars. Platinum
is widely used in autocatalysts, particularly for diesel
engines. ID:nL5N11U1VD
Spot platinum XPT= was down 0.2 percent at $914.50 an
ounce by 2:35 p.m. EDT (1835 GMT), having earlier touched a low
of $894. The metal is on track for its biggest monthly loss
since May 2012 in September, and its steepest quarterly plunge
in seven years.
"There might be some discussions going on, despite the worry
about diesel vehicle demand, if the fundamentals really justify
the market being around $900," James Steel, chief metals analyst
for HSBC Securities in New York, said of the recovery from the
lows.
"The dips have been met a little bit with some short-term
buying."
Even before the Volkswagen scandal broke last week, the
market had been suffering from an increase in supplies following
the end of last year's five-month strike among platinum miners
in major producer South Africa, and a weakness in Chinese
jewelery demand.
Spot gold XAU= was down 0.3 percent at $1,127.80 an ounce,
while U.S. gold futures GCv1 for December delivery settled
down $4.90 an ounce at $1,126.80.
Gold has come under pressure from uncertainty over when
exactly the Federal Reserve will raise U.S. interest rates for
the first time in nearly a decade. Conflicting views by
policymakers, several of whom are scheduled to speak this week,
have stirred more uncertainty.
William Dudley, head of the New York Fed, and John Williams,
head of the San Francisco Fed, both signalled support for a rate
hike this year. But Charles Evans, head of the Chicago Fed,
called for rates to stay near zero until mid-2016.
ID:nL1N11Y2L9
"Fed policy has been instrumental in influencing gold prices
for many months," HSBC said in a note. "The bullion market
consequently continues to look for any indicators of Fed
policy shifts."
Gold spent much of the day trading just below unchanged, but
extended losses slightly after equities turned higher in the
afternoon.
Silver XAG= was up 0.5 percent at $14.63 an ounce, while
palladium XPD= was up 1.7 percent at $654.75 an ounce.