PRECIOUS-Gold posts worst quarter on record despite rally Fri.

* Short-covering, book-squaring seen at quarter's end
* Bullion posts 23 pct drop in second quarter
* U.S. Mint American Eagle sales only a fifth of April sales
* Investors scramble to buy puts to protect downside
* Coming up: U.S. Markit, ISM manufacturing indexes Monday

By Frank Tang and Clara Denina
NEW YORK/LONDON, June 28 (Reuters) - Gold surged more than 2
percent on Friday on end-of-quarter short-covering, but bullion
still posted its largest quarterly loss in at least 45 years due
to selling amid fears the U.S. Federal Reserve may wind down its
stimulus program.
Bullion's 2.3 percent rally was particularly impressive on a
day that had little macroeconomic news and no dramatic movements
in other commodities and financial markets. Silver jumped 6
percent for its biggest one-day jump since January 2012.
After Friday's rally, gold is still 23 percent lower for the
second quarter, its biggest decline since at least 1968, Reuters
data shows.
Some investors aggressively bought back their bearish bets
on fears gold could rebound, while others squared their books on
the last trading day of a dismal second quarter after Thursday's
2 percent drop as funds polished portfolios through the practice
of window-dressing.
"You've seen an over-run on the downside here. I am not
positive that this is the low but we are very close to it," said
John Hummel, AIS Group's chief investment officer, who manages
$400 million in assets including a managed futures fund.
Spot gold was up 2.2 percent at $1,226.46 an ounce by
2:38 p.m. EDT (1838 GMT), rebounding sharply from a low of
1,180.71 an ounce, which marked the cheapest price since August
2010.
Friday's rise was the metal's biggest one-day gain since May
20.
Gold's relative strength index climbed to 28 on Friday but
still below 30 in an area technical analysts regarded as
oversold.
Mark Arbeter, chief technical strategist at S&P Capital IQ,
said: "It will take months for gold to trace out a potential
bullish reversal formation because of the severe technical
damage."
Thursday's slide to below $1,200 an ounce for the first time
in three years has prompted nervous investors to buy put options
to hedge against further losses.
U.S. Comex gold futures for August settled up $12.10
at $1,223.70 an ounce, with trading volume at around 310,000
lots, nearly 50 percent its 30-day average, preliminary Reuters
data showed.
Open interest of Comex gold rose 1 percent to around 400,000
lots, suggesting more participants added bearish positions,
traders said.

PHYSICAL DEMAND LAGS
Bullion has taken a beating - losing as much as 15 percent
or about $200 an ounce - since the beginning of last week when
Federal Reserve Chairman Ben Bernanke laid out a strategy to
roll back the bank's $85 billion monthly bond purchases in a
recovering economy.
After a spectacular surge in physical demand after a $200
two-day dive in April, dealers and jewellers said consumers
across the world are reluctant to buy even after the latest
price decline.
With one day left in the month, sales of the U.S. Mint's
American Eagle gold coins in June stand at only 47,000 ounces,
a fifth of what was sold in all April, when sales hit a 3-1/2
year high. Silver Eagles sales are down 20 percent.
Investors, not individuals, are likely to hold the key for
prices in the second half. The world's eight largest gold ETFs
lost 530 tonnes of gold in the first half of 2013, equivalent to
about 10 percent of annual gold production.
Among other precious metals, silver rose 5.9 percent
to $19.53, rebounding sharply from a near three-year low at
$18.19 an ounce. Platinum rose 1.7 percent to $1,335.49,
while palladium also gained 1.7 percent to $655.85.
2:38 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold AUG 1223.70 12.10 1.0 1179.40 1229.00 282,631
US Silver JUL 19.451 0.918 5.0 18.185 19.555 3,679
US Plat JUL 1336.90 11.70 0.9 1295.40 1337.60 274
US Pall SEP 660.70 10.00 1.5 633.30 663.00 6,592

Gold 1226.46 26.97 2.2 1181.48 1229.00
Silver 19.530 1.080 5.9 18.240 19.580
Platinum 1335.49 21.99 1.7 1296.50 1338.00
Palladium 655.85 10.85 1.7 637.00 659.72

TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 307,106 213,370 182,627 29.56 1.44
US Silver 82,902 67,530 55,844 39.3 0.42
US Platinum 15,267 16,423 12,919 25.97 -0.62
US Palladium 6,688 6,226 5,595