* Gold has bounced back from heavier losses in 10-year bull run

  * Longer term support likely from demand among small investors

  * Analogies drawn with gold's brief post-Lehman dive in 2008

  By Jan Harvey

  LONDON, Sept 26 (Reuters) - Gold's toppling from record highs, culminating in Monday's unprecedented $120 price plunge, has investors asking whether a decade-long bull run is over. History would suggest that while gold has taken a beating, it is far from down and out.

  Monday's tumble to around $1,535 an ounce dragged prices 20 percent below the record $1,920 reached this month. But since its rise from just over $250 in early 2001, gold has bounced back from bigger drops, having fallen 25 percent between May and June 2006, and 27 percent in October 2008.

  The 2008 episode saw gold treated like any other high risk asset when the collapse of Lehman Brothers sparked heavy selling across financial markets in a widely-documented " dash for cash" -- after which it bounced back hard to record highs.

  " Gold and other real assets are not immune from global sell-offs, and this is a textbook example we are seeing now," said Bayram Dincer, an analyst at LGT Capital Management.

  " If you want to draw an analogy, look at 2008, when the Lehman fall saw gold collapsing around $250. The markets are in this 2008, global post-Lehman sell-off mode."

  In the short term, the sharply higher volatility in gold typified by Monday's trade will have battered its already tarnished reputation as a haven. Prices could have further to correct, given their hefty run-up of recent months.

  But expectations that, longer term, other asset classes could prove still more of a risk, coupled with the low interest rate environment, are likely to push prices higher when selling peters out.

  While gold may be seen as less of a haven than in the days before $50 daily price moves became a regular feature of the market, it is hardly alone in seeing heightened volatility.

  " Clearly any move like this is going to make people at least question the assumptions they had that any euro zone stress might be positive for gold," said David Jollie, an analyst at Mitsui Precious Metals. " General financial market volatility is a threat to any asset."

 

  RISKIER ASSETS

  The euro, stock markets and raw materials such as oil and copper have all posted losses this month as investors sold these nominally riskier assets in response to growing concerns over the euro zone debt crisis.

  Gold seemed to have reached a tipping point as worsening financial market conditions forced some investors to realise fat profits in the metal to cover losses elsewhere, and on a rush to the greater liquidity of the dollar and Treasuries.

  " For now, investors are only finding comfort in the relative safety of cash," said UBS analyst Edel Tully.

  These kinds of fears usually benefit gold, so its switch in role from haven to source of funds shows not only how much stress the financial markets are under, but also how overstretched the metal had become.

  Signs that gold was ripe for a correction were rife after its sharp rally to record highs in early September -- which saw it surge by 28 percent in just over two months -- was followed by a period of intense volatility.

  " The rise in volatility taking place in the gold price was clearly an indication that gold was no longer a low-risk asset," said Natixis analyst Nic Brown.

  " We are unwinding much of recent move over last two to three months. It's too early to say whether it's the big burst. It could be, but it's equally possible that it could be what allows the market to push over further highs over the next few months."

 

 

  LONG-TERM INVESTORS HOLD ON

  Holdings of gold-backed exchange-traded funds have remained relatively steady during recent sell-offs, suggesting they have been reasonably resilient to short-term moves.

  Analysts say recent sharp price moves are a likely result of repositioning by large institutional investors like hedge funds. But these are not the only, or even the main, buyers of gold.

  Small-scale retail investors, particularly Asian buyers looking for a store of wealth and a hedge against inflation, have also been key bullion buyers, and are likely to remain so.

  In the short term, investors are likely to be wary of " catching a falling knife" , and buying into the market before the correction has fully run its course. But they may be swift to do so as prices stabilise, analysts predicted.

  While gold's retracement was sharp, spot prices are still up 7 percent this quarter, and nearly 14 percent on the year, despite the failure of a number of key risk factors, like fears of a U.S. default or fresh monetary easing, to materialise.

  " In Q4 2008... the gold price fell by 25 percent over a fairly short period," said VM Group analyst Carl Firman. " But it does tend to recover at significantly higher levels."

  " I think what you will see could be a gold recovery very similar to the one you saw in Q1 2009, when the gold price recovered long before other assets hit bottom."

  " We are still looking at a high inflationary environment, we are looking at negative real interest rates, there are all sorts of uncertainties out there," he said. " That has got to benefit gold, at some point." (Additional reporting by Amanda Cooper Editing by Anthony Barker)

* Brent, U.S. crude fall more than $2, then bounce

  * European, U.S. stocks make early gains

  * Hopes of new measures by ECB to deal with euro zone crisis

  * Risk of financial market contagion, recession remain (Updates detail, prices)

  By Christopher Johnson

  LONDON, Sept 26 (Reuters) - Brent crude oil slipped below $104 per barrel on Monday weakening as investors worried European governments and banks would be unable to solve the euro zone debt crisis and avert wider financial contagion and global recession.

  Brent futures for November < LCOc1> fell $2.31 to a low of $101.66 a barrel, the weakest intra-day level for the front-month contract since Aug. 9, but then recovered to reach a high of $105.34. By 1400 GMT, the contract was 75 cents lower at $103.22.

  Brent plunged 7.35 percent last week in its biggest loss since May 6. So far in September, Brent is down 9 percent.

  U.S. crude < CLc1> lost $2.74 to reach a low of $77.11, but then recovered to trade around $78.50.

  " These are very critical days and weeks ahead, reminiscent very much of the touch-and-go situation we were in back in 2008," Edward Meir, senior commodities analyst at brokers MF Global said. " The key difference this time around is that it is countries and not companies that are in danger of going bust."

  European and U.S. shares gained , while gold and copper , which had both tumbled more than 5 percent in early trade, pared losses.

  " The market has come down a long way and most of the bad news seems now to be priced in," said Christopher Bellew, oil broker at Jefferies Bache. " Equities have stabilised."

  World stocks fell towards 14-month lows early on Monday but then rallied while the euro backed off from a 10-year low against the yen.

  The market took some heart from reports European leaders were seeking new ways to solve the region's debt problems.

  After a weekend of being told by the United States, China and other countries that they must get more aggressive in their crisis response, European officials focused on ways to beef up their existing 440 billion-euro rescue fund.

 

  STABILITY FACILITY

  A move by European leaders to strengthen the European Financial Stability Facility bailout fund as well as reports of a possible repurchase of covered bonds by the European Central Bank lifted investor sentiment.

 

  But many investors worried the oil market remained vulnerable to anotehr sell-off:

  " Despite a bounce in the stock market, this morning's new six-week lows per front-month WTI keep this liquidation phase alive for now as macro guidance and euro zone uncertainties are providing little encouragement toward a purchasing strategy," Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note to clients.

  In the Middle East, political unrest continues as Yemeni President Ali Abdullah Saleh made no pledge on Sunday to step down in his first address to the nation since returning home, calling for early elections in a move unlikely to appease protesters demanding his immediate departure.

  In Libya, senior members of the country's ruling National Transitional Council (NTC) are leaning towards putting on hold plans for a new caretaker government because they cannot agree on a line-up, a source close to the council told Reuters.

  Tanks manned by fighters for Libya's interim government shelled loyalists holding out in Muammar Gaddafi's hometown on Monday as NATO jets circled overhead, ready to renew air strikes on the besieged coastal city of Sirte. (Additional reporting by Francis Kan in Singapore editing by Jason Neely)

By Ingrid Melander and Renee Maltezou

  ATHENS (Reuters) - The Greek government began a race for parliamentary approval of a stepped-up austerity package vital to keep the debt-laden euro zone state afloat and buy time for Europe to approve new rescue measures.

  As Finance Minister Evangelos Venizelos flew home on Monday from talks at the International Monetary Fund in Washington, a newspaper said 85 percent of private sector bondholders had agreed to participate in a voluntary bond swap to restructure Greece's debt -- close to the government's 90 percent target.

  Greek officials said the IMF was seeking written commitments on its latest austerity promises before sending inspectors back probably this week to conclude a review of compliance with a 110-billion-euro bailout programme. Greece has repeatedly missed its deficit reduction targets.

  IMF and EU approval is essential to release an 8-billion-euro (£7 billion) emergency loan that, without which, public salaries, pensions and other bills will go unpaid in October.

  Public anger over ever more belt-tightening remains high and there is increasingly open talk in Europe and beyond of a likely Greek default and a far larger haircut for investors.

  Greek bank shares fell by more than six percent to a 19-year low on Monday on media reports of a larger than planned haircut.

  " Every time such a scenario is heard, bank stocks are hurt. It would mean substantial capital requirements for banks," said Natasha Roumantzi, an analyst at Piraeus Securities.

  Police fired tear gas at protesters on Sunday night outside parliament in the first such unrest after a summer lull, while unions have launched a fresh round of strikes and protests.

  Austrian Finance Minister Maria Fekter said a debt cut for Greece, with compulsory write-downs for investors, was an option of last resort. German Chancellor Angela Merkel said on Sunday default was not an option because it would destroy investors' confidence in Europe.

  German Deputy Finance Minister Joerg Asmussen said euro zone finance ministers would probably not be ready to decide on releasing the aid instalment at their next meeting on October 3, which could trigger a cliffhanger that could unsettle markets.

  Venizelos was expected to lobby lawmakers on his return to pass a new property tax deeply unpopular with the middle-class, on which parliament is due to vote on Tuesday evening.

  Prime Minister George Papandreou will discuss his reform plans with Merkel on Tuesday in Berlin, two days before the German parliament is due to vote on new powers for the euro zone's financial rescue fund.

  Athens' chronic undershooting of agreed fiscal targets and the failure of European officials to staunch worries of a wider euro zone meltdown have hit markets and drawn rebukes from critics stretching from Washington to Beijing.

  TROIKA VERDICT

  Daily newspaper Eleftherotypia reported that participation of private sector bondholders in a Greek debt swap plan is nearing 85 percent, close to the 90 percent target set in July.

  Under the deal, banks would accept a 21 percent write-down on Greek government bonds. But the newspaper said the IMF and Greece discussed at the weekend the possibility of applying a haircut of 40 percent or more if necessary in a second phase.

  Privately, bankers say they could face 60-80 percent losses on a Greek default and some would accept a larger amount than they have agreed to absorb if it lowers the risk of bankruptcy.

  Impatient inspectors abruptly left Greece this month after finding Athens was behind on its targets but the government's agreement to tougher savings looks set to persuade the troika of IMF, European Union and European Central Bank to release fresh funds.

  Investors and policymakers are watching whether Papandreou can push through legislation to put the new plan in place, a process fraught with political infighting and a risk of renewed violent protest as in June.

  " They won't get us out of the crisis with these measures. We'll go bust," said Michalis Smirniotis, 50, a private sector accountant and father of two. " They cut my salary when they should be taxing the rich."

  The first big hurdle is on Tuesday, when parliament is slated to vote on the property tax bill meant to close 2 billion euro holes in the budget this year.

  Ruling PASOK party lawmaker Dimitris Lintzeris said he would back the property levy but he was not certain to support additional austerity measures that might come later.

  " The drip-drip torture cannot continue," he said.

  Analysts say the alternative of default on Greece's 350-billion-euro debt will probably spur PASOK lawmakers to approve law without the drama that nearly sank an earlier package and pushed Greece to the brink of bankruptcy in June.

  Government spokesman Ilias Mossialos said there had been " no institutional discussion" of a possible default.

  " It is not right on the part of the Greek government to open such issues when they have not been opened, and I stress this, by other institutions -- either by the ECB, the IMF, our European partners or the United States," he told Vima radio.

  STRIKES AND PROTESTS

  Taxi drivers are scheduled to stop work this week and rallies are expected to resume outside parliament in Syntagma Square, which has become the epicentre for opposition to the austerity measures.

  Greece's two biggest unions, representing about half of the country's 5-million-strong workforce, are gearing up for two 24-hour strikes and rallies in October.

  But Vassilis Xenakis, international affairs secretary of public sector Union ADEDY, showed little hope that strikes could prevent the measures from passing.

  " I think they will approve all of these measures, even if some disagree in private," he told Reuters.

  Under the new plan, monthly pension cheques, having already been cut by about 15 percent, will fall a further 20 percent on amounts exceeding 1,200 euros.

  The government also plans to put 30,000 public sector workers on notice, cutting their pay by 60 percent and giving them a year to find new work in the state sector or be sacked.

  The troika has also bemoaned slow progress on cracking down on tax evasion and Athens is behind on privatisation plans.

  Main opposition party New Democracy decried the tax hikes as counterproductive, saying they will only deepen recession and push tax revenues further below target. The economy is expected to contract for a fourth straight year in 2012.

  " The worst thing, though, is that they have brought the Greek people to the brink of poverty, as honest and law-abiding taxpayers can no longer pay," senior party member Ioannis Vroutsis said in a statement.

  (Writing by Michael Winfrey Editing by Peter Millership and Paul Taylor)

(Updates with comment, refreshes prices)

  * Gold set for largest three-day fall in 28 years

  * Flight to cash prompts widespread selling

  By Amanda Cooper

  LONDON, Sept 26 (Reuters) - Gold fell on Monday, buckling under the weight of the strength of the dollar as investors scrambled for cash in the face of mounting fear over the impact of a potential Greek debt default on the euro zone economy.

  Euro zone officials played down reports on Monday of emerging plans to halve Greece's debts and recapitalise European banks to cope with the fallout, stressing that no such scheme is yet on the table.

  European equities rose on the back of hopes of a prompt solution to the debt crisis, while industrial commodities such as silver and base metals bore the brunt of investor desire for liquidity in the face of mounting uncertainty and a stronger dollar.

  In the last three days alone, gold has fallen by over 10 percent in its largest three-day slide in 28-1/2 years, having lost more than 20 percent since hitting record highs just shy of $2,000 an ounce earlier this month.

  Spot gold was last down 4.0 percent on the day at $1,589.84 an ounce by 1415 GMT, having fallen earlier by as much as 7.4 percent, putting the difference between the intraday high and low at $128.40, the largest daily price swing on record.

  " It's got things going for it now clearly sovereign risk hasn't gone away. So for gold, as outright insurance, that demand is still there. Where we are struggling at the moment is gold is still sensitive to the dollar," said Citigroup analyst Jon Bergteil.

  " Backing off away from $2,000 under the weight of those issues have not really at the moment led to an immediate long term sell-off," Bergteil said, adding: " What we will require for that is for people to stop worrying about sovereign risk, that they come to the conclusion that the world is going to grow very nicely and we will not face these pot holes."

  After a weekend of being told by the United States, China and other countries that they must get more aggressive in their crisis response, European officials focused on ways to beef up their existing 440 billion-euro rescue fund.

  Deep differences remained over whether the European Central Bank should commit more of its massive resources to shoring up Europe's banks and help struggling euro zone member countries.

 

  INVESTORS RUN

  The lack of consensus on a lasting solution to the euro zone debt crisis has been a major driver in this year's rise in the gold price to record highs above $1,900 an ounce.

  " The rise in volatility taking place in the gold price was clearly an indication that gold was no longer a low-risk asset. So there are a few signs there that would have given you pause for thought, but inevitably when the move happens, everyone is taken a little bit by surprise," said Natixis commodities strategist Nic Brown.

  " I would suggest that part of what is happening is a collective move away from commodities by investors. The fact that there is carnage going on across the commodities spectrum indicates there are a fair few investors who are getting cold feet at this stage and that has hit some precious metals disproportionately," he said.

  Last week's data on investment in U.S. gold futures shows speculators cut their holdings to their lowest level in over two years, as reflected by the fall in net non-commercial open interest on COMEX. < 0#CFTC>

  Short-term interest rates on dollars and other major currencies, have shot up this month, as banks have become increasingly unwilling to extend funding to each other because of fears over their individual exposure to the debt of the peripheral euro zone nations.

  Gold is often sold off as a means of raising dollars when funding conditions deteriorate, much as they did in late 2008 with the onset of the credit crunch that ensued from banks withholding lending because of their concern over counterparty exposure to toxic U.S. mortgage-backed assets.

  " Gold is one of the few assets that remains in positive territory this year, in a sense it is one of the last assets standing, and because of this as investors head for cash they sell the assets that have performed. Essentially gold is a victim of its own success as liquidity trumps," wrote UBS analyst Edel Tully in a note.

  Silver also came under fire, falling by as much as 16 percent at one point in the day and set for its worst three-day fall on record, having lost more than 25 percent in this period.

  The spot price was last down 9.1 percent at $28.22 an ounce, its lowest since last November.

  Platinum fell by 4.2 percent to $1,538.49 an ounce, its lowest since May last year, while palladium recovered from an earlier 5.0-percent fall to trade down 1.1 percent on the day at $624.50 an ounce, around its lowest since last October. (Editing by James Jukwey)

By Natsuko Waki

  LONDON, Sept 26 (Reuters) - World stocks ticked higher and the euro bounced from an earlier 10-year trough against the yen on Monday as speculation that the European Central Bank might cut interest rates to help the economy countered concern over the euro zone debt crisis.

  German government bonds fell broadly as safety-seeking flows waned. But concerns about the global economic slowdown have not gone away, with gold tumbling and copper suffering its biggest one-day drop since the 2008 financial crisis.

  ECB Governing Council member Ewald Nowotny was quoted as saying that the possibility of interest rate cuts should not be ruled out.

  Germany's Ifo economist Klaus Abberger also said he expected the ECB to cut interest rates towards 1 percent, although it was not clear what the time frame would be for such a move.

  Speculation over euro zone easing countered investor concerns about how effective Europe's latest steps to stop fallout from any Greek default, including finding ways to beef up their existing 440 billion euro rescue fund.

  " We've seen a little bit of a hope in risk markets that the EU authorities are finally starting to put something in place to tackle the mounting funding problems in euro land," said Nick Stamenkovic, a strategist at RIA Capital Markets.

  " The Bund market may be just taking a slightly more cautious stance but underlying sentiment remains positive until we see further announcement from EU authorities to tackle these problems we don't see much downside for Bunds."

  The MSCI world equity index erased earlier losses to stand up 0.3 percent on the day, having hit its lowest since July 2010 on Friday. The index has fallen more than 23 percent since hitting a three-year high in May and is also down 17 percent since January.

  European stocks reversed losses to rise 2.7 percent. Emerging stocks were down 0.8 percent after hitting their weakest since September 2009 earlier.

  U.S. stock futures were up around 1.4 percent < SPc1> , pointing to a firmer open on Wall Street later.

  U.S. crude oil < CLc1> were up 0.6 percent at $80.31 barrel.

  Gold was set for its biggest three-day loss in 28 years of nearly 10 percent , while copper fell as much as 6.1 percent to $6,914 a tonne, its sharpest fall since October 2008.

  Concerns over the potential impact of a Greek default, especially on the banking sector, and worries over a U.S. economic slowdown had been weighing on world stocks, fanning safety-seeking flows into top-rated government bonds.

  Deep differences remain over whether the ECB should commit more of its massive resources to shoring up Europe's banks and help struggling euro zone member countries.

  Bund futures < FGBLc1> fell 57 ticks on the day.

  The dollar was down 0.1 percent.

  The euro fell as low as 101.90 yen and hit an eight-month low of $1.3361 , before trimming losses.

  A smaller-than-expected decline in the Ifo index, which gauges German business morale, also helped sentiment a little.

  " (A modest decline in) the Ifo index should dampen the current recession fears for the time being but sends at the same time a clear warning to German policymakers that the solid growth should not be taken for granted. Discussions on possible stimulus packages could be revived in a couple of months," said Carsten Brzeski, economist at ING. (Additional reporting by Emelia Sithole-Materise Editing by Toby Chopra)

* Brent, U.S. crude bounce after falling more than $2

  * European stocks extend early gains

  * Hopes of new measures by ECB to deal with euro zone crisis

  * Risk of financial market contagion, recession remain (Adds detail)

  By Christopher Johnson

  LONDON, Sept 26 (Reuters) - Oil bounced back from seven-week lows on Monday as hopes rose of stronger action to solve the euro zone crisis and avert wider financial contangion and global recession.

  European shares gained , while gold and copper , which had both tumbled more than 5 percent in early trade, pared losses.

  " These are very critical days and weeks ahead, reminiscent very much of the touch-and-go situation we were in back in 2008," Edward Meir, senior commodities analyst at brokers MF Global said. " The key difference this time around is that it is countries and not companies that are in danger of going bust."

  Brent futures for November < LCOc1> fell $2.31 to a low of $101.66 a barrel, the lowest intra-day level for the front-month contract since Aug. 9, but then recovered to trade around $104.30 by 0915 GMT.

  U.S. crude < CLc1> lost $2.74 to reach a low of $77.11 per barrel, after rising more than a dollar earlier. It had recovered to trade around $79.50 by 0915 GMT, down 35 cents.

  Brent plunged 7.35 percent last week in its biggest loss since May 6. So far in September, Brent is down 9 percent.

  World stocks fell towards 14-month lows early on Monday but then recovered while the euro backed off from a 10-year low against the yen.

  The market took heart from reports European leaders were seeking new ways to solve the region's debt problems.

  After a weekend of being told by the United States, China and other countries that they must get more aggressive in their crisis response, European officials focused on ways to beef up their existing 440 billion-euro rescue fund.

 

  " PRICED IN"

  " The market has come down a long way and most of the bad news seems now to be priced in," said Christopher Bellew, oil broker at Jefferies Bache. " Equities have stabilised."

  " I think that the possibility of a Greek default is being addressed. There is a chance that the market won't fall much further, at least for a while."

 

  The dollar slipped around 0.2 percent against a basket of currencies, helping support oil prices.

  Greece, the epicentre of the euro cris crisis, is trying to secure its latest wad of cash from international lenders including the IMF next month to avoid a default.

  The IMF said on Sunday its inspectors would probably return to Athens this week after getting written assurances on a new wave of austerity measures announced by Greece to resolve a debt crisis shaking the euro.

  In the oil-producing Middle East, political unrest continues as Yemeni President Ali Abdullah Saleh made no pledge on Sunday to step down in his first address to the nation since returning home, calling for early elections in a move unlikely to appease protesters demanding his immediate departure.

 

  In Libya, senior members of the country's ruling National Transitional Council (NTC) are leaning towards putting on hold plans for a new caretaker government because they cannot agree on a line-up, a source close to the council told Reuters. (Additional reporting by Francis Kan in Singapore editing by William Hardy)

(Updates throughout)

  * Gold set for largest three-day fall in 28 years

  * Flight to cash prompts widespread selling

  * Coming up: U.S. Aug new home sales 1400 GMT

  By Amanda Cooper

  LONDON, Sept 26 (Reuters) - Gold was set for its biggest three-day loss in 28 years on Monday, as investors fled commodity markets in a scramble to secure cash in the face of mounting fear over the impact of a potential Greek debt default on the rest of the euro zone.

  European policymakers began working on new ways to stop fallout from Greece's near-bankruptcy from inflicting more damage on the world economy after stinging criticism for failing to stem the debt crisis.

  European equities fell, while industrial commodities such as crude oil < LCOc1> and base metals bore the brunt of investor desire for cash in the face of mounting uncertainty.

  In the last three days alone, gold has fallen by nearly 10 percent in its largest three-day slide since February 1983 and implied volatility has risen to a 2-1/2 year high.

  Spot gold was last down 3.0 percent on the day at $1,621.49 an ounce by 0903 GMT, having fallen earlier by as much as 7.4 percent, putting the difference between the intraday high and low at $128.40, the largest daily price swing on record.

  " It shows you that at times of extreme stress, there is not a suitable substitute to liquidity and although gold is liquid by metal standards, in comparison to treasuries, when you get this kind of flight to cash, then it really is cash that counts and that means U.S. dollars," said Credit Suisse analyst Tom Kendall.

  " The markets are going to continue to react this week to the political situation within Europe and I don't see any quick resolution or stimulus coming to the markets."

  After a weekend of being told by the United States, China and other countries that they must get more aggressive in their crisis response, European officials focused on ways to beef up their existing 440 billion-euro rescue fund.

  Deep differences remained over whether the European Central Bank should commit more of its massive resources to shoring up Europe's banks and help struggling euro zone member countries.

 

  INVESTORS RUN

  The lack of consensus on a lasting solution to the euro zone debt crisis has been a major driver in this year's rise in the gold price to record highs above $1,900 an ounce.

  " The rise in volatility taking place in the gold price was clearly an indication that gold was no longer a low-risk asset. So there are a few signs there that would have given you pause for thought, but inevitably when the move happens, everyone is taken a little bit by surprise," said Natixis commodities strategist Nic Brown.

  " I would suggest that part of what is happening is a collective move away from commodities by investors. The fact that there is carnage going on across the commodities spectrum indicates there are a fair few investors who are getting cold feet at this stage and that has hit some precious metals disproportionately," he said.

  Last week's data on investment in U.S. gold futures shows specualtors cut their holdings to their lowest level in over two years, as reflected by the fall in net non-commercial open interest on COMEX. < 0#CFTC>

  Short-term interest rates on dollars and other major currencies, have shot up this month, as banks have become increasingly unwilling to extend funding to each other because of fears over their individual exposure to the debt of the peripheral euro zone nations.

  Gold is often sold off as a means of raising dollars when funding conditions deteriorate, much as they did in late 2008 with the onset of the credit crunch that ensued from banks witholding lending because of their concern over counterparty exposure to toxic U.S. mortgage-backed assets.

  " Gold is one of the few assets that remains in positive territory this year, in a sense it is one of the last assets standing, and because of this as investors head for cash they sell the assets that have performed. Essentially gold is a victim of its own success as liquidity trumps," wrote UBS analyts Edel Tully in a note.

  Silver came under fire, falling by as much as 16 percent at one point in the day and set for its worst three-day fall on record, having lost more than 25 percent in this period.

  The spot price was last down 4.9 percent at $29.54 an ounce, its lowest since last November.

  Platinum fell by more than 3 percent to $1,543.75 an ounce, its lowest since May last year, while palladium fell 0.3 percent to $627.97 an ounce, its lowest since last October. (Editing by James Jukwey)

By Barani Krishnan and Jonathan Leff

  NEW YORK (Reuters) - Gold crashed more than $100 lower on Friday as a slide turned into a free-fall, with weeks of volatility, renewed strength in the dollar and talk of hedge fund liquidation wrecking its safe-haven status.

  Widespread talk of possible selling by big hedge funds covering losses in other markets set off one of the biggest routs on record. Silver futures, which had attracted even more speculative funds over the past year, dived nearly 17 percent, the biggest daily loss since 1987.

  Gold slumped by more than 6 percent -- its biggest slide since the financial crisis in 2008 -- to hit its lowest since the start of August as this week's losses accelerated, even as stock and oil markets stabilised after Thursday's rout.

  Even after the steep loss, gold remained up 16 percent for the year to date. Spot silver was down almost 1 percent for the year.

  Mounting fears this week of a global recession and a deepening Greek debt crisis made investors treat precious metals like any commodity, ignoring the safe-haven appeal that had made them a must-have in times of trouble.

  " I'm sure talk of hedge fund liquidation is helping to pressure things, though there's no confirmation of any single fund selling," said Jonathan Jossen, an independent COMEX trader.

  By 1:43 p.m. EDT (1715 GMT), the spot price of bullion was down 5.4 percent at $1,641 an ounce, after falling to a session low under $1,628. The move was a more than 5 standard deviations beyond the normal one-day change. At $127 an ounce, the intra-day move was the biggest on record in dollar terms.

  U.S. gold futures' benchmark December contract on COMEX fell 5.5 percent to trade under $1,645 an ounce.

  Spot silver dived 15 percent to a seven-month low of $30.44 an ounce.

  Adding to Thursday's losses, gold is down almost 9 percent over the last two days, while silver has lost nearly 25 percent. In the case of gold particularly, it was the third-sharpest daily loss in the past 20 years.

  " We're making new lows and the bull case for gold is on pause for the near term," said Adam Klopfenstein, senior market strategist for precious metals at MF Global in Chicago.

  " In the near-term, the flight-to-quality interest in owning gold is also out of the window as people are not interested in buying it even in the face of fears in the economy. Until it stabilizes, I'm staying out of this market."

  Gold appeared detached from almost every market, ignoring a mild dip in the U.S. dollar index as the selling accelerated. The plunge took out several key technical supports, including the 100-day moving average for the first time since February.

  NERVES JANGLED

  Two months of extraordinarily volatile trading as gold struggled to cling near a record above $1,900 an ounce has unnerved some investors who piled into bullion as a haven of stability in the face of euro zone turmoil and recession.

  But the risk-off trade that benefitted gold most of this year abruptly disappeared over the past two weeks. Gold suddenly fell in tandem with stocks.

  The precious metal also began trading inversely to a newly resillient dollar, as some investors bet bullion had become overly inflated.

  A New York Times story about hedge funds likely liquidating some of their gold holdings after a year-long rally appeared to spur speculation that one specific manager had been selling, although there was no evidence to bear that out. The story did not name or cite any specific funds as behind the selling.

  While gold has fallen sharply this week, trading volumes have been strong but not yet near the record levels of August. By late in the session on Friday, COMEX futures volume of 323,000 lots was 25 percent above the one-month average, but about a quarter less than recent peaks.

By Walter Brandimarte

  WASHINGTON (Reuters) - A group of five leading emerging economies that has banded together to increase their global clout is again struggling to find common ground.

  Expectations the so-called BRICS -- Brazil, Russia, India, China and South Africa -- would come up with a collective plan to offer support to debt-crippled European nations were high as their top finance officials met in Washington this week.

  From their conception 10 years ago as an acronym created by a Goldman Sachs economist, the BRICS have gone a long way to become a new political group that held its first summit two years ago in Russia.

  Some of its members such as Brazil, inspired by forecasts that the group's combined economy will eclipse that of rich countries by 2050, envision a great political role for the group in the global stage.

  In the run-up to their meeting on Thursday, Brazil floated the idea of the BRICS committing billions of dollars to buy bonds issued by the euro zone or to bolster multilateral lenders such as the International Monetary Fund.

  But the meeting produced only a vague statement that they were " open to consider, if necessary, providing support through the IMF or other international financial institutions ... depending on individual country circumstances."

  India's central bank governor poured cold water on Brazil's grand plans, noting the huge demand on his government's resources for poverty reduction at home.

  China also distanced itself from the idea, saying the question of providing the IMF with more resources was a topic for a broader group of countries, including rich ones.

  Russia was even more blunt. Speaking to reporters after a joint BRICS news conference, Russian Deputy Finance Minister Sergei Storchak said the purchase of European bonds by the group was " impossible."

  One official attending the meeting said the news conference was " one of the most idiotic" he had ever attended.

  The BRICS, who have an interest in ensuring Europe's debt crisis does not start washing up on their shores, did not detail how much money they could potentially provide, nor did they mention the possibility of purchasing European bonds.

  In theory, they could have a big impact as a group. Taken together, these fast-growing economies sit on foreign reserves just short of $4.5 trillion, although the lion's share of those riches -- some $3.2 trillion -- belongs to China.

  Brazilian Finance Minister Guido Mantega, trying to explain to reporters on Friday why the BRICS disappointed expectations, repeated that the group was willing to support the euro zone through the IMF.

  Mantega said specifics about how much money they could provide, either to the fund or directly to the euro zone, were not discussed because the Europeans had not requested help.

  " That is the point: the Europeans need to say what they want," he said. " We concluded there is no specific demand."

  The truth, however, is that BRICS countries are really focused on their own issues, said Greg Fager, director of the Asia/Pacific Department at the Institute of International Finance, a bank lobbying group.

  " The domestic economy dominates their world," Fager said. " They know they need to take a greater role in the global economy but they are still dealing with their own issues."

  For now, Fager said, the BRICS's main role in fighting the global crisis is to keep their economies growing -- something they have been successfully doing so far.

  Even if the BRICS could commit billions of dollars to the IMF or directly to troubled European countries, that would still do little to ease their problems, said Chilean Finance Minister Felipe Larrain, who was also in Washington to attend the annual meetings of the IMF and World Bank.

  Only the European Central Bank, Larrain said, could really help the euro zone now by fully backing the sovereign debts of its members.

  " If I said I'm going to give a press conference tomorrow about how Chile can save Europe, I think people would be highly skeptical," he said.

(Updates with U.S. stock indexes' losses for the week) * Analysts cut Q3 earnings growth to 13.7 pct from 17 pct * Forecasts start to pull back for Q4 and 2012 * Financials seen most vulnerable tech targets rise

  By Claire Sibonney

  NEW YORK, Sept 23 (Reuters) - Earnings forecasts for U.S. companies are starting to feel the pain on Wall Street and in the broader economy as the odds of another recession rise.

  Intense fear that global debt issues and stagnant growth cannot be resolved has pummeled market confidence in the past couple of months.

  Earnings have been one of the market's few positives, coming in strong despite economic woes.

  But analysts now are toning down double-digit growth targets for the rest of this year and next on the heels of a record second quarter.

  A distressing signal came from FedEx Corp, the world's No. 2 package delivery company, which many on Wall Street look to as an economic bellwether. FedEx lowered its full-year profit outlook this week, citing high fuel costs and a struggling global economy.

  Since July 1, the Standard & Poor's 500 Index has tumbled 15 percent. Forecasts for third-quarter earnings for the S& P 500 companies have slipped to 13.7 percent growth from 17 percent, according to Thomson Reuters data. But many strategists say those estimates are still too high.

  For next year, S& P 500 earnings-per-share estimates are eyeing $112, which would be a record.

  " If that number is anywhere near real, order the champagne now," said Howard Silverblatt, senior index analyst at S& P.

  Over the last few weeks, analysts have cut earnings estimates for S& P 500 companies across all sectors except technology. Financials are among the hardest hit.

  Negative guidance from companies is also on the rise, outweighing positive guidance by a ratio of more than 2 to 1.

  Estimates for the fourth quarter and 2012 are down slightly to around 15.4 percent and 13.5 percent, respectively, and could pull back further as analysts react to more guidance, as well as to critical economic data, including housing and jobs numbers, and a worsening debt crisis in the euro zone.

  Profit growth could still be relatively strong for the season that kicks off in early October, and that could lift stocks, which sold off nearly every day this week on panic reminiscent of the financial meltdown in 2008.

  The Dow Jones industrial average ended the week down 6.4 percent, its largest weekkly percentage loss since October 2008, while the S& P 500 slid 6.6 percent. The Nasdaq Composite Index tumbled 5.3 percent for the week.

  " The way things are going, we're going to be in a recession by the end of the fourth quarter," said Barton Biggs, managing partner of New York-based Traxis Partners, in an interview with Reuters Insider.

  The mystery lies beyond the third quarter into next year. Strategists speculate that estimates may be inflated by 5 percent to 15 percent as the market questions how far the cost slashing since the last recession can shield the bottom line.

  FINANCIALS: THE ACHILLES' HEEL

  Financials, worth more than 13 percent of the S& P 500 and the second-most influential group behind technology stocks, have been subjected to drastic cuts in earnings estimates.

  " That's obviously the Achilles' heel of the market," said Robbert Van Batenburg, head of equity research at Louis Capital in New York. " Investment banking is probably going to be very moribund, bank lending is still not existing, and there are no gains to be booked at all."

  Banks are also suffering from worries about possible write-downs of euro-zone debt and less profitable lending due to the U.S. Federal Reserve's new measures to lower longer-term interest rates.

  Financial institutions' shares have been dragged lower in recent days on renewed fears of exposure to European debt. Credit-default swaps, a measure of the cost of insurance against default on long-term debt, have been climbing.

  " The wild card here is really the banks. That's really where the earnings for the S& P have been kind of jerked around in the last couple years," said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co., in San Francisco.

  Insurers are also very susceptible to a lower-rate environment, while energy and consumer discretionary sectors are vulnerable to see-sawing commodity prices and damaged confidence.

  For the country's biggest insurers, the Fed's " Operation Twist," designed to stimulate credit for consumers and businesses, could threaten earnings for years to come. The problem is returns on insurers' investment portfolios can't keep pace with the obligations they have accumulated from torrid sales of annuities and life policies.

  TECHS BUCK TREND

  Tech, meanwhile, has been the sector where forecasts are rising behind powerhouses such as Apple, whose stock hit an all-time high this week.

  The forecast for technology earnings for the full-year 2011 is 16.6 percent growth, compared with 2010, according to Thomson Reuters data released on Friday. In July, the forecast called for growth of 13.7 percent.

  Yet even in this healthy sector, a cautionary tale came this week from chipmaker Xilinx, a component of the Philadelphia Semiconductor Index. Xilinx dropped its sales forecast, citing weak industrial markets.

  And after a relatively quiet few days on the economic calendar, the flow of data will pick up next week with reports on housing, factory activity, consumer spending and the broader economy. New home sales for August are due on Monday, followed by the consumer confidence index on Tuesday.

  Durable goods orders for August will be released on Wednesday, giving an indication of demand for manufactured items like refrigerators meant to last three years or more. On Thursday, the government will release its final reading on growth of second-quarter gross domestic product. On Friday, August personal income and spending data will come out, as well as the final reading on September consumer sentiment from the Reuters/University of Michigan surveys. (Wall St Week Ahead runs every Friday. Questions or comments on this column can be e-mailed to: claire.sibonney(at)thomsonreuters.com) (Reporting by Claire Sibonney Editing by Jan Paschal)