PRECIOUS-Gold slides 4 pct, near 3-year low as Wall Street rallies

Wed Jun 26, 2013 4:02pm EDT

* Gold, silver prices hit lowest since August 2010
    * SPDR, biggest gold ETF, has biggest outflow in 2 months
    * Gold down 23 pct in Q2, on track for record quarterly loss
    * Coming up: U.S. PCE price index, personal income Thursday

 (Adds comments, update prices)
    By Frank Tang and Jan Harvey
    NEW YORK/LONDON, June 26 (Reuters) - Gold tumbled 4 percent
on Wednesday, taking it near a three-year low as a rallying U.S.
equity markets further cut into demand for bullion as a hedge
against economic uncertainty.
    Silver dropped 5 percent and platinum group metals also
declined sharply.
    Bullion tumbled again even after the U.S. government slashed
its estimate for first-quarter economic growth, which made
investors less worried that the Federal Reserve would move soon
to end its U.S. economic stimulus.
    Bullion has slid around $125 an ounce in four sessions since
the Fed signalled it plans to wind down the era of easy money.
With two trading days left in the second quarter, gold was down
23 percent for the period, on course for its biggest quarterly
decline since Reuters began tracking gold prices in 1968.
    "We bought gold for two reasons: because we were worried
about the inflationary impact of policy and because we thought
the financial system was going to fall apart," said Sean
Corrigan, chief investment strategist at Diapason Commodities
Management. 
    "Although it may be completely the wrong judgement, the
market has decided that none of those at the moment is a
concern," Corrigan said.
    Spot gold slumped to its lowest since August 2010 at
$1,223.54 an ounce. It was last down 4 percent at $1,225.91 an
ounce by 3:08 p.m. EDT (1908 GMT).
    U.S. gold futures for August delivery settled down
$45.30 to $1,229.80. Trading volume exceeded 315,000 lots,
sharply above its 30-day average of 211,000, preliminary Reuters
data showed.
    Gold, which has lost more than a quarter of its value this
year, accelerated losses during Wednesday's session as the S&P
500 rose. The benchmark U.S. stock index was up more than
1 percent in late trade. 
    "People want risk-on and gold is therefore seen as a source
of cash and not as a safe haven, because that's not needed,"
said Simon Weeks, head of precious metals at the Bank of Nova
Scotia.
    On Tuesday, the world's largest gold-backed exchange-traded
fund posted its biggest outflow in two months. Holdings in SPDR
Gold Trust fell 16.23 tonnes, 1.65 percent from the day
before, to 969.50 tonnes, their lowest since February 2009.
  
    On charts, several technical analyses including the relative
strength index suggested gold is oversold, said Carlos
Perez-Santalla at brokerage Marex Spectron. "A pop could be
expected if another test of the downside fails," he said.
    Silver fell to its lowest since August 2010 at $18.39 an
ounce. Spot prices were later down 5.2 percent at $18.57
an ounce.     
    
    ETF OUTFLOW, ASIA DEMAND EYED
    The world's No. 1 gold ETF the SPDR Gold Shares 
reported the biggest one-day drop in its holdings in more than
two months at 16.23 tonnes on Tuesday. That brought the fund's
total outflow for the year to 381 tonnes.
    Further weighing on gold, demand in the No. 1 consumer India
is likely to fall this quarter as the government moves to curb
gold imports. 
    Worries about a liquidity crunch in China also pressured
physical gold demand, analysts said.
    Among platinum group metals, platinum was down 3.8
percent at 1,298.99 an ounce, while palladium slid 4.9
percent to $629.97 an ounce.
 3:08 PM EDT     LAST/    NET   PCT      LOW    HIGH  CURRENT
                SETTLE   CHNG  CHNG                       VOL
 US Gold AUG   1229.80 -45.30  -3.6  1221.00 1277.50  285,723
 US Silver JUL  18.587 -0.939  -4.8   18.360  19.580   83,798
 US Plat JUL   1303.70 -46.80  -3.5  1299.30 1351.10   14,076
 US Pall SEP    633.25 -35.55  -5.3   630.80  667.50    5,987
                                                               
 Gold          1225.91 -50.83  -4.0  1222.55 1277.79         
 Silver         18.570 -1.010  -5.2   18.460  19.630
 Platinum      1298.99 -51.01  -3.8  1303.50 1349.25
 Palladium      629.97 -32.77  -4.9   634.00  664.24
                                                               
 TOTAL MARKET              VOLUME          30-D ATM VOLATILITY
                CURRENT   30D AVG  250D AVG   CURRENT     CHG
 US Gold        315,083   211,046   182,075     26.69    2.30
 US Silver      145,180    62,340    57,447     34.03   -3.63
 US Platinum     30,992    15,627    11,806     25.67   -1.93
 US Palladium     6,092     6,586     5,563                  
                                                               
 
 (Additional reporting by Veronica Brown in London; Editing by
Marguerita Choy and David Gregorio)