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SYDNEY, June 9 (Reuters) Gold fell to its lowest price since mid-April as a big sell-off overnight accelerated on Friday in step with a stronger U.S. dollar.

Spot gold was quoted as low as $607.10 an ounce -- the lowest since April 17 -- versus $612.20 at the Sydney open. At 0223 GMT, gold cost $608.50/$609.50 an ounce.

Gold was quoted at $609.50 late in New York against $629.30 on Wednesday.

The losses meant gold had slid by about $123, or 17 percent, from its 26-year high of $730 hit on May 12.

A drop below $600 was seen as raising the prospect of a technical sell-off that could drive prices towards $540.

Investors tend to buy gold as a hedge against a weak dollar and inflation, and sell when the market moves in the opposite direction.

''The dollar is working against gold,'' a dealer said.

The dollar held near a one-month high against the euro on Friday after rallying on indications that the European Central Bank would be modest in raising interest rates following its latest rise.

Softer oil prices -- discounting inflation prospects -- also took some polish off gold's allure among investors.

U.S. crude futures held above $70 a barrel on Friday after touching a 2-{ week low on Thursday on hopes the death of al Qaeda's leader in Iraq may allow oil exports to improve.

Spot silver was up 3 cents from the late New York quote to $11.12/$11.21 an ounce.

Spot platinum was up $8 at $1,195/$1,202 an ounce.Spot palladium was down $3 at $310.00/$317.00 an ounce.

REUTERS CH PC1006