* Dollar rises vs euro on speculation over ECB action
* Inverse link between gold, Treasuries appears broken
* US COMEX volume strong head of contract rollover
(Adds comment, second byline, dateline, updates market
By Frank Tang and Jan Harvey
NEW YORK/LONDON, May 28 Gold prices fell to
their lowest in nearly 4 months on Wednesday, extending the
previous session's two-percent sell-off, as the dollar rallied
against the euro and stock markets held near recent record
With a lack of major U.S. economic indicators on Wednesday,
bullion investors turned to outside markets for trading cues.
The S&P 500 equities index inched up to hover near
Tuesday's record high, while the dollar index rose on softness
among other major currencies such as the euro, which fell amid
speculation of an interest rate cut by the European Central Bank
ahead of next week's policy meeting.
"I don't think we can ignore the dollar strength - the rise
in the dollar in anticipation of euro zone central-bank action
next week is weighing down on gold," said Adrian Ash, head of
research at online precious-metals market BullionVault.
Analysts also cited a breakdown of gold's usual inverse
correlation with U.S. bond yields. Yields on 10-year U.S.
Treasuries tumbled to their lowest in 11 months.
Spot gold fell 0.4 percent to $1,258.50 an ounce by
2:40 p.m. EDT (1840 GMT), having earlier hit $1,255.66 which
marked its weakest since early February.
U.S. COMEX gold futures for June delivery settled
down $6.20 an ounce at $1,259.30 an ounce.
Trading volume was nearly 300,000 lots, nearly double its
30-day average at 150,000 lots, preliminary Reuters data shows,
partly due to the June-August contract rollover ahead of first
notice day Friday.
Among other precious metals, silver ended flat,
unchanged from Tuesday's close at $19.05. Platinum was
down 0.5 percent at $1,450.25 an ounce and palladium
climbed 0.5 percent to $834 an ounce.
2:40 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold JUN 1259.30 -6.20 -0.5 1255.80 1267.30 150,598
US Silver MAY 19.035 -0.004 0.0 00.000 00.000
US Plat JUL 1462.70 0.40 0.0 1442.70 1468.80 13,982
US Pall JUN 839.85 9.20 1.1 830.55 844.65 10,419
Gold 1258.50 -4.89 -0.4 1256.35 1267.33
Silver 19.050 0.000 0.0 19.010 19.150
Platinum 1450.25 -6.75 -0.5 1452.00 1464.75
Palladium 834.00 4.00 0.5 832.90 843.00
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 280,162 150,162 179,915 15.53 -0.09
US Silver 35,623 52,525 55,076 21.6 1.81
US Platinum 14,456 9,999 12,588 20.18 0.20
US Palladium 24,510 6,856 5,965 24.71 1.27
(Additional reporting by A. Ananthalakshmi in Singapore;
Editing by Susan Thomas, Pravin Char and Chizu Nomiyama)