By Clara Denina
LONDON (Reuters) - Gold fell below $1,200 to its lowest since August 2010 on Friday, and was on track to post its worst quarter on record as investors flee on persistent worries over the U.S. Federal Reserve's plan to wind down its monetary stimulus.
Bullion has taken a beating since the beginning of last week - losing as much as 15 percent, or about $200 an ounce - after Fed Chairman Ben Bernanke laid out a strategy to roll back the bank's $85 billion monthly bond purchases in the face of a recovering economy.
The lower prices have failed to rekindle physical demand in Asia, traditionally the biggest buyer of gold, and investors have continued to exit exchange-traded gold funds (ETFs).
"The question now emerges to whether we are going to see further unwinding of speculative positions or whether the activity of bargain hunters is going to provide some upside but the risks are still very much to the downside," Mitsubishi analyst Jonathan Butler said.
"Anything that comes out as confirming what the FOMC has already set out, that is a moderate improvement in economic unemployment conditions, is going to be bearish gold and probably other precious metals too."
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Spot gold fell to a near three-year trough of $1,180.71 an ounce, before gaining 0.3 percent to $1,202.86 by 0940 GMT. Comex gold futures for August fell $11.40 to $1,200.10 an ounce.
Traders said stop-loss orders - automatic sale orders placed at pre-set levels to limit losses - were triggered when gold was sitting on the edge of $1,200. Others said that a lot of funds and institutions are required to close their positions ahead of the end of the quarter, causing strong liquidation.
Gold is down 25 percent for the April-June period, its biggest quarterly loss ever, based on Reuters data that dates back to 1968. A close at its three-year lows on Friday would also make the metal's worst weekly performance since 1983.
Bullion has fallen around 28 percent this year - its worst since 1981 - as investors snubbed its inflation-hedge appeal, with a recovering economy stirring fears of an end to central bank support.
Holdings in SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, stood unchanged near four-year lows for the second consecutive day on Thursday. The fund recorded unprecedent outflows of 12.26 million ounces, down 28 percent, to 31.7 million ounces since the start of the year.
TEPID DEMAND
Gold's plunge to three-year lows is drawing only a muted response from global consumers, who are waiting for prices to stabilise.
"Support at $1,150 - $1,160... should be a level that buyers are eyeing," ANZ said.
In Hong Kong and Singapore, premiums over London spot prices rose to $4 and $3 from earlier this week, as demand has not picked up as much as expected, dealers said.
Tokyo premiums remained stable at $2 an ounce, while Dubai premiums were around $3 and Istanbul's at $5 to $6.
Demand in top consumer India also saw just a small increase, but tight supplies due to government restrictions on imports is prompting higher premiums.
Concerns over a credit crunch and economic growth in China also weighed on investors.
Silver touched a near three-year low at $18.19 an ounce, before gaining 1.8 percent at $18.82 an ounce. Prices fell 38 percent since the start of the year.
Platinum rose 0.8 percent to $1,323.50 an ounce and palladium was down 0.2 percent to $643.47 an ounce.
(Additional reporting by A. Ananthalakshmi in Singapore; editing by Jeff Coelho)