* Investors sell gold to raise liquidity as equities slide
* Fed flags potential inflation risk from energy, food
* Platinum group metals fall sharply on demand view
* Coming up: U.S. February producer prices Wednesday
(Rewrites, adds comments, updates prices, changes dateline,
previously NEW YORK/LONDON)
By Frank Tang
NEW YORK, March 15 (Reuters) - Gold prices dropped to a
one-month low on Tuesday, but were well off their lows, as fear
of a potential nuclear catastrophe in Japan sent world
financial markets tumbling in a flight to safety.
Bullion was caught in a global equity rout that wiped out
about $650 billion in valuations as investors dumped assets
considered risky and sought the safety of cash or government
debt.
Platinum group metals also fell sharply as Japan's
deepening nuclear crisis dampened demand expectations due to
plant closures and production outages in the country's auto
industry.
Total trade in U.S. metals futures rose to the highest
level since late January.
"We have a risk-off trade going on as a result of the
issues in Japan. There has been institutional liquidation and
other liquidation globally as people are choosing to raise cash
at this moment," said James Steel, chief commodity analyst at
HSBC bank.
Spot gold <XAU=> fell as low as $1,380.90 an ounce and was
later down 2.3 percent at $1,394.10 an ounce by 2:54 p.m. EDT
(1854 GMT), notching its biggest one-day loss in nearly 2
months.
U.S. gold futures for April delivery <GCJ1> settled down
2.3 percent at $1,392.80 an ounce.
Silver <XAG=> tumbled as much as 6 percent to a low of
$33.56 an ounce, and was last down 4.2 percent at $34.33 an
ounce.
Other safe havens, such as U.S. Treasuries and the Swiss
franc <CHF=>, rallied after Japanese stocks posted their worst
two-day slide since 1987.
Japan raced to avert a catastrophe on Wednesday after an
explosion at a quake-crippled nuclear power complex sent
radiation wafting into Tokyo, prompting some people to flee the
capital and others to stock up on essential supplies.
[]
"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," said Commerzbank analyst Eugen
Weinberg.
Bullion was little changed after the U.S. Federal Reserve
said the economy was gaining traction while flagging potential
inflation risks from costlier energy and food, confirming its
ultra-loose monetary policy. []
The Fed dedicated an unusually large portion of its policy
statement to inflation concerns surrounding a recent spike in
energy and food prices, which it said would most likely prove
transitory.
LIQUIDITY IS KEY
Analysts said part of the pressure on gold stemmed from
investors cashing in on the metal's 8 percent rise in the past
month on escalating violence in the Middle East to cover losses
or margin calls on their equity holdings.
"Money is even fleeing gold ... a circumstance we do not
find all that shocking as liquidity is now the order of the
day," said Dennis Gartman, author of the Gartman Letter, a
daily investment newsletter.
Platinum prices <XPT=> shed as much as 3.5 percent, falling
to their lowest level since mid-December at $1,687.99 an ounce.
They were later down 2.8 percent at $1,700.49 an ounce.
Palladium <XPD=> fell as much as 7.5 percent to $684.50 an
ounce, its fifth day of losses and its longest losing streak
since early August. It later was down 5.4 percent at $700.
Major Japanese car makers, including Toyota <7203.T>,
Nissan <7201.T> and Honda <7267.T>, stopped vehicle production
following Friday's earthquake, which 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.
(PDF of stories on the Japan quake's impact on commodities:
http://link.reuters.com/bum58r)
Prices at 2:54 p.m. EST (1854 GMT)
LAST/ NET PCT YTD
CLOSE CHG CHG CHG
US gold <GCJ1> 1392.80 -32.10 -2.3% -2.0%
US silver <SIK1> 34.117 -1.723 0.0% 10.3%
US platinum <PLJ1> 1705.60 -46.70 -2.7% -4.1%
US palladium <PAM1> 704.90 -43.30 -5.8% -12.2%
Gold <XAU=> 1394.10 -32.55 -2.3% -1.8%
Silver <XAG=> 34.33 -1.52 -4.2% 11.2%
Platinum <XPT=> 1700.49 -49.50 -2.8% -3.8%
Palladium <XPD=> 700.00 -40.00 -5.4% -12.4%
Gold Fix <XAUFIX=> 1400.50 -6.50 -0.5% -0.7%
Silver Fix <XAGFIX=> 33.88 -230.00 -6.4% 10.6%
Platinum Fix <XPTFIX=> 1711.00 9.50 0.6% -1.2%
Palladium Fix <XPDFIX=> 700.00 23.00 3.2% -11.5%
(Additional reporting by Amanda Cooper and Jan Harvey in
London; Editing by Walter Bagley)
