Wires

PRECIOUS-Gold drops, set for worst weekly loss in 7 yrs on virus-induced rout

K. Sathya Narayanan

(Adds comments, details and updates prices)

* Palladium on track for worst week on record

* Silver slides 3%, platinum eyes biggest weekly fall since 1986

* Coronavirus infects more than 127,000 people worldwide

March 13 (Reuters) - Gold prices extended losses on Friday and were set for their steepest weekly decline in nearly seven years as traders sold bullion to finance margin calls in other assets hammered by panic over the coronavirus. Palladium regained some ground after plummeting as much as 28% on Thursday as a plunge in wider financial markets rippled through precious metals. However, it was en route for its biggest weekly fall on record.

Spot gold was down 0.9% at $1,563.45 per ounce by

0320 GMT, and was on track for a weekly decline of 6.6% - the most since June 2013. The metal slid as much as 4.5% on Thursday.

U.S. gold futures fell 1.7 % to $1,563.20.

"We had stock and bond markets falling, signalling a dramatic liquidity crunch. People have to liquidate their gold positions. They need money and are scared now," said Stephen Innes, chief market strategist at AxiCorp. "It's not just gold - the warning signs were there across every asset class and we could see it in the currency markets right now as the dollar is getting stronger and is in demand again." A rout in world financial markets deepened after the European Central Bank held back on rate cuts on Thursday and as Washington suspended travel from Europe. Countries and central banks have ramped up measures to cushion their economies from the pandemic, which has infected over 127,000 people worldwide. The U.S. Federal Reserve provided massive liquidity injection on Thursday, having slashed it benchmark interest rate last week. "Weak equity markets, supportive monetary policies and economic uncertainty are supportive for gold but it will not rise in a linear fashion - you might have a steep rise and then something pulling it back," John Sharma, economist at National Australia Bank said, adding there is a general loss of interest in commodities.

Palladium rose 0.3% to $1,837.73 per ounce, but was

headed for its biggest ever weekly loss of about 28%. Platinum gained 1.1% to $771.69, however, it was set to post its worst week since 1986, with a weekly decline of 14.3%. "The market is coming along to the fact that the recovery in China might not be as quick as it had hoped and that will weigh on (palladium) demand. It's still a pretty tight market but expectations of a demand hit are growing," ANZ analyst Daniel Hynes said.

Silver fell 2.2 % to $15.47 per ounce, having earlier

dipped up to 3.3%.

(Reporting by K. Sathya Narayanan and Asha Sistla in Bengaluru; Editing by Aditya Soni)