* Gold trimmed losses; bullish trend intact
* Silver slides by more than 10 pct, most since October 2008
* Technical selling in thin condition compounds losses
(Recasts, adds details and quotes)
By Nick Trevethan and Rujun Shen
SINGAPORE, May 2 (Reuters) - Silver prices tumbled on
Monday, making their biggest loss since late 2008, while gold
trimmed losses triggered by news that al-Qaeda leader Osama bin
Laden was killed in a U.S.-led operation in Pakistan.
Silver , hit by a recovery in the dollar, increased
futures trading margins and a technical overhang after a 170
percent rally over the last 12 months, fell as much as 10
percent to $43.04 an ounce, its lowest in nearly two weeks,
before recovering to $44.92.
COMEX silver futures <SIcv1> tumbled 13 percent to $42.20
earlier in holiday-thinned trade, and trimmed losses to $44.96.
"Silver is an accident waiting to happen, and it seems like
it has incurred 'bumper' damage today," said Citigroup analyst
David Thurtell.
Gold initially fell more than $5, as bin Laden's death was
seen to take off some of its safe-haven appeal, but traders
expected gold's bullish trend to remain intact, against the
backdrop of the macroeconomic and political environment.
"I'm not too concerned about gold at the moment," said
Darren Heathcote, head of trading at Investec Australia, adding
that the continuously weakening dollar and lofty oil prices
would remain supportive of bullion.
Spot gold fell over $5 to an intra-day low of
$1,540.39, after hitting a record of $1,575.79 earlier. It was
trading at $1,558.55 an ounce by 0638 GMT, down 0.3 percent from
the previous close.
COMEX gold futures <GCcv1> reversed early losses to edge up
0.2 percent to $1,559.20.
GOLD'S APPEAL SEEN UNDIMMED
Concerns that extremist groups might launch reprisal attacks
over the death of bin Laden may brighten gold's safe-haven
appeal.
"The threat from terrorism is not over. Others will fill the
gap he has left. I suspect that his death will trigger a
retaliatory attack in the short term," said Thurtell. "I think
gold's status as a safe haven is intact."
Markets across large parts of Asia and much of Europe were
closed for May Day and Labour day holidays, reducing the number
of market participants and making for volatile trade.
Speculators scaled back their bullish bets in COMEX silver
futures and options to the lowest level since early February,
regulator data showed on Friday. []
The CME Group Inc said on Thursday it would raise
maintenance margins for COMEX silver futures by 13.2 percent to
$10,750 per contract from $9,500 effective Friday, April 29.
Some traders put down silver's spectacular fall to an
unwinding of a short gold-silver ratio position, compounded by
automated stop-loss orders.
The gold-silver ratio, used to measure the number of silver
ounces needed to buy an ounce of gold, rebounded to about 35
from below 32, its lowest level since the early 1980s. This
compares with an average ratio of 64 in the past 29 years.
"There is nothing from a fundamental perspective to cause a
fall this large. Silver has been the most rapidly appreciating
of the metals in the past months and if there was one that
looked a bit frothy it was silver," said Ben Westmore,
commodities economist at National Australia Bank.
"This is mostly technical. We expect silver to be in
relatively close step with gold and while both have risen
strongly, silver may have moved a bit too far ahead."
But in spite of the falls, traders said it was too soon to
close the book on silver's astounding rally over the past 12
months.
"Although that was a brutal wash out of some length, silver
is now back into the original bullish trend channel, so while
$41 holds, the trend is still intact," one trader said.
Among other precious metals with large-scale industrial
applications, platinum fell 1 percent and palladium
dropped 1.2 percent.
China's manufacturing growth slowed in April, a survey
showed on Sunday, suggesting that the government's tightening
efforts have weighed on the world's second-largest economy more
heavily than expected. []
The official purchasing managers' index for China fell to
52.9 in April from 53.4 in March, well shy of market forecasts
for an increase to 54.0.
(Additional reporting by Alejandro Barbajosa in SINGAPORE,
Siddesh Mayenkar in MUMBAI;Editing by Clarence Fernandez)
