PRECIOUS-Gold down 1.5 pct on China fears, Wall St margin calls
* Investment demand seen falling further, physicals slow
* Gold hovers only $10 above three-year lows
* Liquidity squeeze in China weighs heavily on gold, equities
(New updates throughout, adds comments, market details second byline, dateline, pvs NEW YORK) NEW YORK/LONDON, June 24 (Reuters) - Gold fell 1.5 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 fell at least 3 percent on global economic fears. Gold hovered about $10 above a three-year low reached last week. The S&P 500 index, a U.S. equities benhcmark, dropped 2 percent on worries about the U.S. Federal Reserve's plan 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 1.5 percent to $1,277.21 an ounce performance last week since September 2011 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 fell $15.50 to $1,276.50 an ounce, with trading volume on track to finish below its 30-day daily average, preliminary Reuters data showed. The dollar traded near its highest in nearly three weeks against a basket of currencies. 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 monthly mortgage-backed bond purchases.
CHINA'S CASH SQUEEZE The S&P 500 was down 2 percent 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 at above 2.5 percent. The rise in the 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 3 percent to $19.48 an ounce, having reached a near-three year low of $19.35 last week. Platinum fell 3.7 percent to $1,324.99 an ounce and palladium was down 3.1 percent to $652 an ounce. Prices at 12:22 p.m. EDT (1622 GMT)
LAST NET PCT YTD CHG CHG CHG US gold 1276.50 -15.50 -1.2% -23.8% US silver 19.425 -0.006 -2.9% -35.7% US platinum 1326.80 -42.70 -3.1% -13.8% US palladium 652.00 -22.75 -3.4% -7.3% Gold 1277.21 -19.54 -1.5% -23.7% Silver 19.48 -0.60 -3.0% -35.7% Platinum 1324.99 -50.51 -3.7% -13.8% Palladium 652.00 -21.00 -3.1% -7.1% Gold Fix 1286.75 3.50 0.3% -22.7% Silver Fix 19.65 -22.00 -1.1% -34.4% Platinum Fix 1360.00 0.50 0.0% -10.7% Palladium Fix 669.00 1.00 0.1% -4.3%
(Additional reporting by A. Ananthalakshmi in Singapore; Editing by Jane Baird and David Gregorio)