* Gold trimmed losses; bullish trend intact
* Silver slides by more than 10 pct, most since October 2008
* Technical selling in thin condition compounds losses (Recasts, adds details and quotes)
By Nick Trevethan and Rujun Shen
SINGAPORE, May 2 (Reuters) - Silver prices tumbled on Monday, making their biggest loss since late 2008, while gold trimmed losses triggered by news that al-Qaeda leader Osama bin Laden was killed in a U.S.-led operation in Pakistan.
Silver , hit by a recovery in the dollar, increased futures trading margins and a technical overhang after a 170 percent rally over the last 12 months, fell as much as 10 percent to $43.04 an ounce, its lowest in nearly two weeks, before recovering to $44.92.
COMEX silver futures
"Silver is an accident waiting to happen, and it seems like it has incurred 'bumper' damage today," said Citigroup analyst David Thurtell.
Gold initially fell more than $5, as bin Laden's death was seen to take off some of its safe-haven appeal, but traders expected gold's bullish trend to remain intact, against the backdrop of the macroeconomic and political environment.
"I'm not too concerned about gold at the moment," said Darren Heathcote, head of trading at Investec Australia, adding that the continuously weakening dollar and lofty oil prices would remain supportive of bullion.
Spot gold fell over $5 to an intra-day low of $1,540.39, after hitting a record of $1,575.79 earlier. It was trading at $1,558.55 an ounce by 0638 GMT, down 0.3 percent from the previous close.
COMEX gold futures
GOLD'S APPEAL SEEN UNDIMMED
Concerns that extremist groups might launch reprisal attacks over the death of bin Laden may brighten gold's safe-haven appeal.
"The threat from terrorism is not over. Others will fill the gap he has left. I suspect that his death will trigger a retaliatory attack in the short term," said Thurtell. "I think gold's status as a safe haven is intact."
Markets across large parts of Asia and much of Europe were closed for May Day and Labour day holidays, reducing the number of market participants and making for volatile trade.
Speculators scaled back their bullish bets in COMEX silver futures and options to the lowest level since early February, regulator data showed on Friday. [ID:nN29175149]
The CME Group Inc said on Thursday it would raise maintenance margins for COMEX silver futures by 13.2 percent to $10,750 per contract from $9,500 effective Friday, April 29.
Some traders put down silver's spectacular fall to an unwinding of a short gold-silver ratio position, compounded by automated stop-loss orders.
The gold-silver ratio, used to measure the number of silver ounces needed to buy an ounce of gold, rebounded to about 35 from below 32, its lowest level since the early 1980s. This compares with an average ratio of 64 in the past 29 years.
"There is nothing from a fundamental perspective to cause a fall this large. Silver has been the most rapidly appreciating of the metals in the past months and if there was one that looked a bit frothy it was silver," said Ben Westmore, commodities economist at National Australia Bank.
"This is mostly technical. We expect silver to be in relatively close step with gold and while both have risen strongly, silver may have moved a bit too far ahead."
But in spite of the falls, traders said it was too soon to close the book on silver's astounding rally over the past 12 months.
"Although that was a brutal wash out of some length, silver is now back into the original bullish trend channel, so while $41 holds, the trend is still intact," one trader said.
Among other precious metals with large-scale industrial applications, platinum fell 1 percent and palladium dropped 1.2 percent.
China's manufacturing growth slowed in April, a survey showed on Sunday, suggesting that the government's tightening efforts have weighed on the world's second-largest economy more heavily than expected. [ID:nL3E7G100E]
The official purchasing managers' index for China fell to 52.9 in April from 53.4 in March, well shy of market forecasts for an increase to 54.0. (Additional reporting by Alejandro Barbajosa in SINGAPORE, Siddesh Mayenkar in MUMBAI;Editing by Clarence Fernandez)