UPDATE 2-Gold drops 2 pct after Fed cuts less than expected

                                
 (Updates prices)
                                
 By Lewa Pardomuan
                                
 SINGAPORE, March 19 (Reuters) - Gold fell more than 2
percent on Wednesday after a less than expected 75 basis points
interest rate cut by the U.S. Federal Reserve boosted the
dollar, lifted stocks and dimmed bullion's appeal as an
alternative investment.
                                
 Platinum was well below its record high but still supported
by disruptions in power supply in main producer South Africa,
while silver and palladium also hovered below recent highs.
                                
 Gold <XAU=> hit a low of $980.80 ounce, down from
$1,002.30/1,003.10 an ounce late in New York on Tuesday, when
it tumbled to its lowest in nearly a week at $977.80. It struck
a record at $1,030.80 an ounce on Monday.
                                
 Gold has risen more than 23 percent in 2008 on fears of
inflation as crude oil hit records, hopes of further rate cuts
and deepening U.S. financial concerns. Some investors had bet
the Fed could cut by as much as 100 basis points.
                                
 "Whilst bullion prices may have suffered overnight, in the
longer term the increasing threat of inflation will help to
support prices and could drive it back towards its recent
all-time high," said Investec Australia in a daily report.
                                
 The dollar dropped against the yen on Wednesday as
investors booked profits a day after the U.S. currency posted
its biggest one-day gain against the yen in a decade after the
Fed rate cut. ID:nT264310]
                                
 Lower rates typically reduce the attractiveness of
dollar-denominated securities and curb demand for the dollars
to buy them.Japan's Nikkei share average <.NN25> jumped 2.8
percent to track gains on Wall Street after the interest rate
cut.
                                
 "It looks like hedge funds are selling, so the market may
go down further for today and tomorrow. I guess $970 will be
the level which will attract physical buyers," said a dealer in
Singapore, referring to jewellers and retail investors.
                                
 "I think $1,025 is the high but it may difficult to touch,
but if gold breaks $996, then it will be good for the bulls,"
he said.
                                
 Gold futures for April delivery <GCJ8> on the COMEX
division of the New York Mercantile Exchange fell $15.2 an
ounce to $989.1 an ounce, off Monday's record of $1,033.90.
                                
 Spot platinum <XPT=> fell to $1,948/1,958 an ounce from
$1,960/1,970 late in New York -- well below an historical high
of $2,290 an ounce hit on March 4.
                                
 The most active Tokyo platinum futures <0#JPL:> ended the
morning session 83 yen per gram higher at 6,074 yen in a
technical rebound after falling by the 300 yen daily limit on
Tuesday.
                                
 South Africa's vital gold and platinum mines were saved
from power cuts on Tuesday after Eskom fixed two power
generating units, but the state-owned electricity firm said the
situation remained serious. [ID:nL18743601]
                                
 Silver <XAG=> edged up to $19.78/19.83 an ounce from
$19.76/19.81 an ounce. Spot palladium <XPD=> fell to $476/481
an ounce from $477/482 an ounce.
  Precious metals prices at 0233 GMT
 Metal             Last    Change  Pct chg  YTD pct chg
Turnover
 Spot Gold         988.50    7.00   +0.71     18.71
 Spot Silver        19.78    0.12   +0.61     33.92
 Spot Platinum    1950.00  -10.00   -0.51     28.29
 Spot Palladium    476.00   -1.00   -0.21     29.35
 TOCOM Gold       3195.00   27.00   +0.85      4.41       
30751
 TOCOM Platinum   6074.00   83.00   +1.39     13.77       
11069
 TOCOM Silver      638.80    5.90   +0.93     18.08         
456
 TOCOM Palladium  1568.00   65.00   +4.32     16.06        
4390
 Euro/Dollar       1.5675
 Dollar/Yen         99.68
 TOCOM prices in yen per gram, except TOCOM silver which is
priced in yen per 10 grams. Spot prices in $ per ounce.
 (Editing by Michael Urquhart)