* iShares Silver Trust holdings drop biggest since early 2008
* Gold targets $1,492.95 - technicals [ID:nL3E7G501Y]
* Coming up: ECB rate decision; 1145 GMT (Updates prices, adds details)
By Rujun Shen
SINGAPORE, May 5 (Reuters) - Spot silver prices dropped almost 2 percent on Thursday, down 22 percent from a record hit a week ago, after another hike in margin requirements for U.S. silver futures squeezed some of the speculative froth out of the market.
Gold held steady, with traders hesitant to take positions before the European Central Bank's rate decision due later in the day.
The CME Group set successive hikes on COMEX silver futures margins, effective on Thursday and next Monday, which combined with three other increases in the past two weeks has raised the margin requirement by 84 percent, effectively increasing the cost of trading the metal. [ID:nN04107715]
Investors are also scrambling out of silver, with holdings in the world's largest silver-backed exchange-traded fund, iShares Silver Trust, down nearly 5 percent on Wednesday, the second sharpest one-day fall since the fund launched in 2006.
The fund's holding peaked at 11,390.6 tonnes on April 25, the same day that COMEX silver futures hit a 31-year high.
"There is liquidation going on in silver after prices rose too much and too fast. Nobody knows where the bottom is, but I don't think there is much room below $35," Ronald Leung, a dealer at Lee Cheong Gold Dealers in Hong Kong, said.
Spot silver fell by 1.7 percent to $38.66 an ounce by 0743 GMT, after dipping to a one-month low of $38.56. It had risen 170 percent in a year to a record $49.51 an ounce on April 28.
COMEX silver
Spot gold , which lagged silver's stellar rally and is now lagging its fall, was steady at $1,516.49 an ounce after three consecutive sessions of declines. Bullion is up 7 percent this year, versus a 25 percent rise for silver.
COMEX gold
"We expect gold prices to remain pretty resilient, but at the moment it is probably a little frothy," said Ben Westmore, commodities economist at the National Australia Bank.
"A lot of rise in gold prices was due to safe-haven investment and weakness in the U.S. dollar."
A more hawkish rhetoric from the ECB and continued weak U.S. economic numbers has kept the euro near a 17-month high versus the dollar, lending some support to precious metals.
Markets will focus on whether the ECB uses the "strong vigilance" code words to signal a rate rise in June, after a hike in April. [ID:nLDE74325D]
Investors are also watching for a key U.S. employment report due on Friday, which is expected to show easing payroll growth in April due to high gasoline prices. [ID:nN03301605] Precious metals prices 0743 GMT Metal Last Change Pct chg YTD pct chg Volume Spot Gold 1516.49 0.84 +0.06 6.84 Spot Silver 38.66 -0.68 -1.73 25.28 Spot Platinum 1818.99 1.74 +0.10 2.91 Spot Palladium 742.72 -0.78 -0.10 -7.10 TOCOM Gold 4072.00 -15.00 -0.37 9.20 22271 TOCOM Platinum 4904.00 41.00 +0.84 4.43 3055 TOCOM Silver 118.70 1.30 +1.11 46.54 1953 TOCOM Palladium 2030.00 -17.00 -0.83 -3.20 197 COMEX GOLD JUN1 1516.70 1.40 +0.09 6.70 15506 COMEX SILVER JUL1 38.67 -0.72 -1.84 24.97 12288 Euro/Dollar 1.4890 Dollar/Yen 80.25 TOCOM prices in yen per gram. Spot prices in $ per ounce. COMEX gold and silver contracts show the most active months (Editing by Himani Sarkar)