* Spot gold touches low at $1,321.35 an ounce
* Bullion off around 20 percent so far this year
* Global gold ETF holdings at lowest in more than a year
(New updates throughout, adds comment, market details)
By Veronica Brown and Frank Tang
LONDON/NEW YORK, April 16 Gold recovered almost
2 percent on Tuesday after buyers of physical bullion jumped in
at cheaper prices following Monday's historic plummet, but the
market had trouble sustaining gains and there was little
confidence that gold was out of the woods.
Gold extended its decline to a two-year low overnight before
steadying. The metal's historic sell-off in the last two
sessions prompted investors to assess the damage to bullion's
status as a hedge against inflation and currency depreciation.
There were signs of small pick-up in physical demand from
India, historically the world's largest bullion consumers. In
addition, U.S. coin demand also rebounded as retail investors
bought at lower prices.
Bullion on Monday shed 8.5 percent and recorded its biggest
ever daily fall in dollar terms - at one point it was down $142
an ounce - catching gold bulls, speculators and veteran
investors by surprise.
"I'm selling into the rally and waiting to figure out
what's going on," said Charles Gradante, co-founder of The
Hennessy Group, which invests in hedge funds.
"The question is where's gold going from here. Now this
could be a dead-cat bounce we're getting today," Gradante said.
Spot gold bottomed at $1,321.35 overnight, the lowest
price since Jan. 28, 2011. It fetched $1.373.80 an ounce by 2:42
p.m. EST (1842 GMT), up 1.6 percent from Monday's close.
Gold has fallen almost 20 percent so far this year after an
unbroken 12 years of gains and is some 28 percent down from the
record high hit in September 2011 at $1,920.30.
U.S. Comex gold futures for June delivery settled up
$26.30 at $1,387.40 an ounce.
Trading volume was strong but well off an all-time high over
700,000 lots on Monday. Turnover as of early Tuesday afternoon
was 433,000 contracts, more than doubled its 30-day average of
190,000, preliminary Reuters data showed.
Tuesday's rally largely ignored a call by Goldman Sachs to
sell gold and buy natural gas after bullion's steep decline
because of "a more confident economic environment."
Physical dealers saw inquiries from jewelers following the
latest sell-off, but there were no signs of buying related to
tensions between the two Koreas or bombings in Boston on Monday,
which killed three people.
INVESTMENT DEMAND IN DOUBT
Heavy outflows on global gold exchange-traded funds, which
cut holdings to their lowest in more than a year, could also
mark the end of a love affair between gold and investors.
Traders cited liquidation by prominent hedge funds in gold
ETFs. Prominent hedge fund managers John Paulson told clients
earlier this month his gold fund suffered double-digit losses in
the first quarter, while David Einhorn's dedicated gold fund
lost 28 percent during the same period.
Bank of America Merrill Lynch became the latest major bank
to downgrade their gold price forecast after billionaire
financier George Soros made a bearish call last week. On Monday,
BofA said gold may fall to $1,200 per ounce before prices
Among other precious metals, silver rallied 3.8
percent to $23.43. Platinum group metals also rebound after
heavy losses on Monday, with platinum up 3 percent at
$1,443.74 an ounce and palladium at $675.75, up 3.6
(Additional reporting by Lewa Pardomuan and Manolo Serapio Jr;
in Singapore, Clara Denina in London; Editing by Anthony Barker
and Alden Bentley)