* Investors sell gold to raise liquidity as markets slide
* Commodities tumble across the board; oil down $4/barrel
* Coming up: U.S. FOMC statement on interest rates, 1815 GMT
(Updates prices, adds comment)
By Amanda Cooper and Jan Harvey
LONDON, March 15 (Reuters) - Gold fell 3 percent on Tuesday
and was on track for its biggest one-day loss since July as
mounting worries over Japan's nuclear crisis hurt financial
markets, prompting a flight to liquid assets like cash.
Spot gold <XAU=> fell as low as $1,380.90 an ounce and was
bid at $1,390.20 an ounce at 1333 GMT, against $1,426.65 late in
New York on Monday. U.S. gold futures for April delivery <GCJ1>
fell $34.80 an ounce to $1,390.10.
Stock markets in Europe fell to their lowest in more than
three months, oil prices tumbled and the dollar index rose 0.7
percent as risk aversion spiked on fears of a potential
radiation disaster in Japan after last week's earthquake.
[] [] []
"The markets were probably overly short on cash," said
Commerzbank analyst Eugen Weinberg. "High risk aversion is
prompting the taking off of any risk. Even if it doesn't seem
logical to move away from gold in the current situation, risk
aversion is telling many market participants that cash is king."
But while gold may fall further if the current market unrest
continues, he said, in the longer term weakness is unlikely to
persist. "Given low interest rates and extremely low real
interest rates, it might be a good buying environment for gold."
Other safe-haven assets such as U.S. Treasuries or the Swiss
franc <CHF=> rallied after Japanese stocks posted their worst
two-day slide since 1987, while the VDAX-New volatility index
<.V1XI>, which reflects German options volatility, rocketed to
its highest since May 2010.
Stock markets in Europe posted heavy losses, while the New
York Stock Exchange and NYSE Amex Cash Markets invoked a rule to
smooth trading at the market open, as futures pointed to a drop
of more than 2 percent on Japan's nuclear crisis. [] []
MARGIN CALLS
Analysts said 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," said UBS
strategist Edel Tully in a note. "Investors sometimes have
little choice but to sell the yellow metal to cover margin calls
and losses elsewhere."
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. []
<---------------------------------------------------------
Reports on earthquake in Japan []
PDF of quake impact on commodities:
http://link.reuters.com/bum58r
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Gold's move lower comes after 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 the metal to a record $1,444.40 last week.
Other precious metals were also hammered, with silver <XAG=>
tumbling more than 6 percent to a low of $33.56 an ounce, before
edging back to $33.92 an ounce against $35.85.
Platinum prices <XPT=> shed 3.5 percent, falling to their
lowest since mid-December at $1,687.99 an ounce. They were later
at $1,701.24 an ounce against $1,749.99.
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.
Carmakers are the biggest consumers of platinum and palladium.
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 more than 6 percent to $693.97 an
ounce, its fifth day of losses and its longest losing streak
since early August. It was later at $698.22 against $740.
(Editing by James Jukwey)
