Gold steadies near low, set for worst quarter on record

By Clara Denina

LONDON (Reuters) - Gold steadied on Friday after falling to its lowest since August 2010 but stayed on track to post its worst quarter on record as fears persisted that the U.S. Federal Reserve will wind down its monetary stimulus soon.

Bullion has taken a beating - losing as much as 15 percent or about $200 an ounce - since the beginning of last week when Fed Chairman Ben Bernanke laid out a strategy to roll back the bank's $85 billion monthly bond purchases in a recovering economy. This would support an increase in interest rates, making gold comparatively less attractive.

The lower prices have failed to rekindle physical demand in Asia, traditionally the biggest buyer of gold.

"The question now emerges to whether we are going to see further unwinding of speculative positions or whether the activity of bargain hunters is going to provide support, but the risks are still very much to the downside," Mitsubishi analyst Jonathan Butler said.

"Anything that comes out as confirming what the FOMC (Fed committee) has already set out - that is a moderate improvement in economic unemployment conditions - is going to be bearish gold and probably other precious metals too."

Spot gold fell to a near three-year trough of $1,180.71 an ounce and then recovered to $1,202.56 by 1152 GMT, up 0.3 percent on the day. Comex gold futures for August fell $9.60 to $1,202.10 an ounce.

Traders said stop-loss orders - automatic sale orders placed at pre-set levels to limit losses - were triggered when gold was sitting on the edge of $1,200. Others said that a lot of funds and institutions are required to close their positions ahead of the end of the quarter, causing strong liquidation.

Gold is down 25 percent for the April-June period, its biggest quarterly loss ever, based on Reuters data that dates back to 1968. A close at its three-year lows on Friday would also mean the worst weekly performance since 1983.

Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, were unchanged at near four-year lows for a second consecutive day on Thursday. The fund has recorded unprecedented outflows of 12.26 million ounces so far this year, down 28 percent to 31.7 million ounces.

Concerns over a credit crunch and economic growth in China also weighed on investors.

TEPID DEMAND

Gold prices near three-year lows have attracted only a muted response from global consumers, who are waiting for them to stabilise.

"Support at $1,150-$1,160 ... should be a level that buyers are eyeing," AN said.

Premiums over London spot prices rose to $4 per ounce in Hong Kong and $3 in Singapore from earlier this week, dealers said.

Tokyo premiums remained stable at $2 an ounce, while Dubai premiums were around $3 and Istanbul's at $5 to $6.

Demand in top consumer India also increased slightly, but tight supplies due to government restrictions on imports led to higher premiums.

Silver touched a near three-year low at $18.19 an ounce, before gaining 1.9 percent at $18.80 an ounce. Prices fell 38 percent since the start of the year.

Platinum rose 1 percent to $1,326 an ounce and palladium was up 0.4 percent to $647.47 an ounce.

(Additional reporting by A. Ananthalakshmi in Singapore; editing by Jane Baird)