PRECIOUS-Gold slides as Japan crisis batters commods

                                
 * Gold caught in commods sell-off
                                
 * Speculators sell gold to cover losses
                                
 * Coming Up: U.S. FOMC rate decision Jan; 1815 GMT
                                
 
                                
 (Updates prices)
                                
 By Amanda Cooper
                                
 LONDON, March 15 (Reuters) - Gold slid by 2 percent to
two-week lows on Tuesday, caught in a broad-based sell-off by
commodity investors who grew increasingly unnerved by Japan's
growing nuclear crisis.
                                
 Other safe-haven assets such as U.S. Treasuries or the Swiss
franc <CHF=> rallied after Japenese stocks posted their worst
two-day slide since 1987 and the country faced potential
disaster after a nuclear power plant north of Tokyo exploded.
                                
 The VDAX-New volatility index <.V1XI>, which reflects German
options volatility, rocketed to its highest since May 2010,
while crude oil and the other precious metals tumbled.
                                
 Gold <XAU=> was down 2 percent at $1,397.99 an ounce by 1154
GMT, having fallen earlier by as much as 1.8 percent. U.S. gold
futures <GCv1> fell 1.6 percent to $1,402.40.
                                
 "Gold has gone down less than other commodities, perhaps
sometimes it just maybe is the proportional response which is
the important thing," said Mitsubishi analyst Matthew Turner.
                                
 "Gold has not been acting as much as a safe haven as other
safe-havens but it's also not been acting as much as a commodity
as other commodities."
                                
 Analysts said earlier part of the pressure on gold stemmed
from investors cashing in on the metal's 8 percent rise in the
last month on the back of escalating violence in the Middle East
to cover losses or margin calls on their equity holdings.
                                
 "We argue that it's not unusual for gold to tumble during
initial episodes of a severe broad asset sell-off. Investors
sometimes have little choice but to sell the yellow metal to
cover margin calls and losses elsewhere before gold then
divorces itself from the downtrend," said UBS strategist Edel
Tully in a note.
                                
 "In the current climate there is more opportunity for gold
to rally, as the need for safe havens accelerates," she said.
                                
 
                                
 ECONOMIC IMPACT
                                
 Japan, the world's third largest economy, faces a recovery
and reconstruction bill of at least $180 billion -- 3 percent of
its annual economic output -- or more than 50 percent higher
than the total cost of the 1995 earthquake in Kobe.
[ID:nN14176069]
                                
  The yen rallied against higher yielding currencies on
Tuesday, driven by expectations that Japanese insurers and other
companies will need to repatriate funds to help pay claims and
reconstruction costs of the country's worst earthquake. [FRX/]
<---------------------------------------------------------
                                
  Reports on earthquake in Japan        [ID:nTOPNOW4]
                                
  Factbox on SPDR holdings            [ID:nL3E7EF0O6]
                                
  PDF of quake impact on commodities:
                                
  http://link.reuters.com/bum58r
 -------------------------------------------------------->
                                
 Yen-priced gold <XAUJPY=R>, which rallied to its highest
since at least 1983 last week, fell by 2.0 percent, set for its
biggest one-day decline since late January.
                                
 "It still looks like it's constructive. It's just
consolidating. But if we get a large sell-off in equities,
people will tend to sell gold," said Jonathan Barratt, managing
director of Commodity Broking Services in Melbourne.
                                
 "But if it's a major concern, then people will eventually go
to gold as the last resort."
                                
 Rising tensions in North Africa and the Middle East, where
Libyan rebels continue to battle troops loyal to Muammar Gaddafi
for control of key oil ports, pushed gold to a record $1,444.40
an ounce last week.
                                
 Brent crude oil futures fell by nearly 4 percent <LCOc1> as
Japan's deepening nuclear crisis fed risk aversion, while copper
<CMCU3> shed more than 2 percent and several agricultural
commodities also came under pressure. [O/R] [MET/L] [GRA/]
[SOF/L]
                                
 Platinum prices <XPT=> shed over 2 percent, falling to their
lowest in two months, after major Japanese car makers including
Toyota <7203.T>, Nissan <7201.T> and Honda <7267.T> stopped
vehicle production following Friday's earthquake that has
crippled roads, railways and ports.
                                
 According to refiner Johnson Matthey, Japan was the largest
single national user of platinum in 2010, and accounted for 18
percent of global autocatalyst demand of 2.985 million ounces.
  Palladium <XPD=> fell by 3.5 percent to $713.97 an ounce,
having fallen for five days in a row, its worst streak since
early August last year.
                                
 Silver <XAG=>, often bought as a cheaper, but more volatile
safe-haven alternative to gold, fell 3.7 percent to $34.45 an
ounce.