PRECIOUS-Gold down 1 pct on China fears, Wall St margin calls

Mon Jun 24, 2013 4:35pm EDT

* Investment demand seen falling further, physicals slow
    * Gold hovers only $10 above three-year lows
    * Liquidity squeeze in China weighs heavily on gold,
equities
    * Coming up: U.S. durable goods Tuesday

 (Updates prices, adds market details)
    By Frank Tang and Clara Denina 
    NEW YORK/LONDON, June 24 (Reuters) - Gold fell around 1
percent on Monday, extending last week's 7 percent slide as
fears of a cash crunch in China spooked investors, and a slide
in U.S. equities prompted some to liquidate bullion to cover
margin calls.
    Other precious metals including silver and platinum group
metals also tumbled on global economic fears.
    Gold hovered about $15 above a three-year low reached last
week. The S&P 500 index, a U.S. equities benchmark,
dropped about 1 percent on worries about the U.S. Federal
Reserve's plans to end economic stimulus, and about a cash
squeeze in China that could hurt the world's second-largest
economy. 
    On Friday, bullion holdings in SPDR Gold Trust, the
world's largest gold-backed exchange-traded fund, fell a further
0.5 percent to the lowest in more than four years. 
    Analysts said physical buying of gold has not been enough to
offset fund selling of gold exchange-traded products (ETP).
    "Physical demand had previously absorbed the excess supply
from disinvestment but ETP outflows could gain momentum from
here. Much of the physical buying seen in April is unlikely to
materialise again," said Suki Cooper, precious metals strategist
at Barclays Capital.
    Spot gold was down 1.1 percent to $1,282.74 an ounce
by 4:01 p.m. EDT (2001 GMT). Bullion posted its worst weekly
performance last week since September 2011 and pushed the price
as low as $1,268.89. It is down 24 percent so far this year.
    U.S. Comex gold futures for August delivery settled
down $14.90 to $1,277.10 an ounce, with trading volume about 25
percent below its 30-day daily average, preliminary Reuters data
showed.

    FED TALK, CHINA'S CASH SQUEEZE
    Last Wednesday, Fed Chairman Ben Bernanke gave his most
explicit signal yet that the U.S. central bank was considering
scaling back its $85 billion per month of Treasuries and
mortgage-backed debt purchases.
    The S&P 500 fell on Monday as Chinese equity markets
plummeted after the People's Bank of China said banks needed to
do a better job of managing cash as the PBOC attempts to move
China away from credit-driven investment.  
    Interest rates for short-term funds in China rose to
extraordinary levels last week after big commercial banks held
back on lending in the interbank market.
    The Fed's remarks helped push up the benchmark 10-year U.S.
Treasury yield to its highest in almost two years.
    The rise in yields from U.S. government bonds and other
fixed-income products is weighing heavily on gold which pays no
interest and tends to be ultra-sensitive to changes in
interest-rate expectations.
    Also weighing on precious metals were news that Goldman
Sachs cut its year-end 2013 gold price forecast to $1,300 an
ounce from $1,435, while UBS lowered its 2013 outlook for silver
to $24 an ounce from $29 previously. 
 
    Among other precious metals, silver fell 2.3 percent
to $19.61 an ounce, having reached a near-three year low of
$19.35 last week. 
    Platinum fell 3.1 percent to $1,332.49 an ounce and
palladium was down 2 percent to $659.72 an ounce.
    Commodities research and management firm CPM Group said in a
report on Monday platinum prices are expected to rise in 2013 on
better fabrication demand and improving investment sentiment
toward the metal.
 4:01 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold AUG   1277.10 -14.90  -1.2  1275.10 1300.70  152,008
 US Silver JUL  19.493 -0.466  -2.3   19.380  20.175   57,682
 US Plat JUL   1329.10 -40.40  -2.9  1325.00 1379.00   18,520
 US Pall SEP    657.65 -17.10  -2.5   650.00  678.15    5,234
                                                              
 Gold          1282.74 -14.01  -1.1  1276.73 1301.01         
 Silver         19.610 -0.470  -2.3   19.480  20.220
 Platinum      1332.49 -43.01  -3.1  1327.00 1377.25
 Palladium      659.72 -13.28  -2.0   652.50  674.75
                                                              
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        162,079   213,583   181,829     25.41    0.06
 US Silver       83,486    59,588    57,295     35.15   -5.32
 US Platinum     28,465    14,344    11,806     21.73   -0.17
 US Palladium     5,282     6,467     5,563                  
                                                              
   

 (Additional reporting by A. Ananthalakshmi in Singapore;
Editing by Jane Baird, David Gregorio and Chris Reese)
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