* Bullion bounces up as equities losses rattle investors
* Gold tumbled early after CME margin hike
* SPDR sees biggest one-day outflow since Jan. 25
* Coming up: Bernanke's speech at Jackson Hole Friday (Recasts, updates prices, market activity )
By Frank Tang
NEW YORK, Aug 25 (Reuters) - Gold rose on Thursday after two days of sharp declines, as tumbling European and U.S. equity markets on talk that Germany might enact a short-selling ban prompted investors to buy bullion as a safe haven.
Early in the session, bullion dropped as much as 3 percent or more than $200 from Tuesday's record highs, as funds liquidated positions due to CME Group's second margin hike this month and technical weakness.
Many market watchers remained long-term bulls on gold although they said the precious metal could correct further after rising as much as $400 since July on speculation the Fed this week would announce new plans to stimulate a sluggish U.S. economy.
"With that big sell-off in Germany, it spooked people about the financial problems lurking in Europe and the European banks. You will probably see gold pull back a little more, but the (upward) trend would still be intact," said Evan Smith, co-manager of Global Resources Fund at U.S. Global Investors, which manages $2.5 billion in assets.
Spot gold
U.S. December gold futures
Spot silver
Germany's DAX <.GDAXI> dropped as much as 4 percent on rumors Germany could enact a short-selling ban following the example of other European nations. A German Finance Ministry spokesman told Reuters they were not planning a general short-selling ban. [ID:nN1E77O0ZZ]
Gold fell more than 1 percent early, after the CME Group raised margins on gold futures by about 27 percent, the biggest hike in more than 2-1/2 years and the second increase in a month. [ID:nL4E7JO3UG]
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Gold volatility: http://r.reuters.com/gah43s
Gold/equities correlation: http://r.reuters.com/cen43s
Asset returns in 2011: http://r.reuters.com/suz52s
Inflation adjusted gold price: http://r.reuters.com/pun62s
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Investors have cashed in on gold's latest rally after the yellow metal surged nearly 20 percent in early August to Tuesday's record high at $1,911.46 an ounce. On Wednesday, U.S. gold futures also posted their sharpest price decline since 1980.
"Gold's decline with such a dramatic magnitude in such a short period of time is driven by short-term momentum investors coming out, not long-term investors," said Stanley Crouch, chief investment officer at Aegis Capital, who oversees $2 billion in assets.
Holdings of the world's largest gold-backed exchange-traded
fund, the SPDR Gold Trust
BERNANKE EYED
Investors had their eyes on Jackson Hole. Wyoming, where Bernanke was due to give a speech on Friday. Some have speculated the Fed chief will hint at a third round of government debt purchases, or quantitative easing, to bolster a sluggish economy. [ID:nFEDAHEAD]
"I wouldn't advise investors to change a thing. We still largely have our gold exposure intact," said U.S. Global's Smith.
"I don't know if we are going to see anything incrementally new and significant enough to...fix the problems that are plaguing the economy," referring to Bernanke's speech, Smith said.
Among platinum group metals, spot platinum
SETTLE CHNG CHNG VOL US Gold DEC 1763.20 5.90 0.3 1705.40 1771.10 332,237 US Silver SEP 40.745 1.583 4.0 38.760 41.030 78,688 US Plat OCT 1822.40 -3.90 -0.2 1788.60 1835.00 7,497 US Pall SEP 751.15 8.00 1.1 743.25 756.00 3,728 Gold 1757.99 7.44 0.4 1703.90 1766.99 Silver 40.780 1.150 2.9 38.780 40.950 Platinum 1813.24 11.04 0.6 1790.00 1829.00 Palladium 747.83 4.03 0.5 745.30 753.25 TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 250D AVG CURRENT CHG US Gold 359,637 177,127 18.49 0.37 US Silver 118,201 61,613 40.35 0.41 US Platinum 7,925 7,300 22 2.00 US Palladium 6,231 3,973 (Additional reporting by Jan Harvey in London; Editing by David Gregorio)