RPT-PRECIOUS-Gold falls 3 percent as investors cash in gains

(Repeats to widen distribution; no change to headline or text)

* Gold poised for biggest two-day drop in nearly 3 years

* Strong US durable goods orders dent safe-haven appeal

* Market buzzes with talk of potential US Fed easing (Recasts, updates prices, market activity; adds second byline, dateline, previously LONDON)

By Frank Tang and Jan Harvey

NEW YORK/LONDON, Aug 24 (Reuters) - Gold dropped 3 percent on Wednesday as news of a sharp rise in U.S. durable goods orders prompted more profit-taking on bullion's to record highs ahead of a Federal Reserve gathering this week.

Gold appeared headed for for its biggest two-day decline in almost three years. It had rallied nearly 9 percent in six sessions before Tuesday's fall on speculation the Federal Reserve might be planning another round of stimulus for the sluggish U.S. economy.

Analysts said it's time for gold investors to take money off the table after a safe-haven rally extended too far, too fast in recent weeks. Bullion was up by as much as $400 since July.

"The correction really should be taking place now, because of all the (bets) on the table," said Ashok Shah, chief investment officer at London & Capital.

"But the journey is not complete until Jackson Hole is done," Shah said, referring to an annual central bank conference in Jackson Hole, Wyoming starting on Thursday

Spot gold was down 2.5 percent at $1,783.29 an ounce by 11:03 a.m. EDT (1503 GMT), off its session low of $1,762.90. On Tuesday, it dropped about 4 percent after an early rise to a record $1,911.46.

U.S. gold futures for December delivery was down $74.60 at $1,786.60 an ounce.

Silver dropped 2.8 percent to $40.64 an ounce.

While analysts predicted gold would remain in a structural uptrend, they said a sharp correction from this month's rally was possible, especially if the central bank meeting at Jackson Hole does not result in a Fed announcement of a third round of government bond buying, or quantitative easing, also known as QE3.

"Hopes that QE3 will continue to prop up commodity prices are at best premature. Gold is perhaps most vulnerable to disappointment," Capital Economics strategists said in a note.

MARGINS HIKE EYED

Investors also were watching for potential gold margin requirement hikes from the CME Group, after the Shanghai Gold Exchange raised margins on some of its gold forward contracts twice this month. [ID:nL4E7JN040] [ID:nL4E7JN040]

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

CBOE gold volatility index: http://link.reuters.com/gah43s

Asset returns in 2011: http://r.reuters.com/suz52s

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The CBOE gold volatility index is at its highest since April 2009. The Hong Kong Mercantile Exchange also raised the margin requirement on its gold futures contract on Aug. 23 by nearly 26 percent.

Holdings of the SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, fell by nearly 25 tonnes on Tuesday, their biggest one-day outflow since Jan. 25. [GOL/ETF] Prices at 11:03 a.m. EDT (1503 GMT)

LAST NET PCT YTD

CHG CHG CHG US gold 1786.60 -74.60 -4.0% 25.7% US silver 40.670 -1.621 -3.8% 31.5% US platinum 1842.60 -37.50 -2.0% 3.6% US palladium 757.90 -6.50 -0.9% -5.7% Gold 1783.29 -46.26 -2.5% 25.6% Silver 40.64 -1.18 -2.8% 31.7% Platinum 1836.49 -20.31 -1.1% 3.9% Palladium 753.72 -3.23 -0.4% -5.7% Gold Fix 1770.00 -80.00 -4.3% 25.5% Silver Fix 42.08 -80.00 -1.9% 37.4% Platinum Fix 1865.00 5.00 0.3% 7.7% Palladium Fix 759.00 3.00 0.4% -4.0% (Editing by David Gregorio)