* Short-covering rally to Monday's high looks overdone - trader
* Silver falls more than 3 pct to lowest since Feb. 4
* China may have locked 1,000 T gold in financing deals - WGC
* Coming up: U.S. housing starts data Wednesday (Adds new 6th paragraph, three-week high in paragraph 10)
By Frank Tang and Jan Harvey
NEW YORK/LONDON, April 15 Gold tumbled about 2 percent on Tuesday on heavy stop-loss orders placed by momentum traders as prices broke below the key 200-day moving average.
Silver and platinum group metals also sold off after Monday's rally across the board.
In the 10 minutes between 8:20 a.m. and 8:30 a.m. EDT (1220-1230 GMT), trading volume in U.S. gold futures measured nearly 20,000 lots, or one-fifth of the total turnover at the time. Prices plunged $15 at 8:27 a.m. in just a minute, ahead of the release of data showing rising U.S. consumer inflation.
A bout of stop-loss orders placed by 'trend followers' cascaded into each other when prices sank below their 200-day moving average near $1,300 an ounce, said Frank McGhee, head precious metals dealer at Chicago commodities brokerage Alliance Financial LLC.
Gold's sharp pullback came even as Ukrainian armed forces on Tuesday launched a 'special operation' against militiamen in the country's Russian-speaking east.
Traders said the premium of geopolitical tensions has already priced in the gold market.
"When you have today news, the gold market is likely to go in the opposite direction of what you had expected," McGhee said. "Gold is doing what it should be as opposed to just reacting to the immediate headline of the day."
Spot gold was down 1.8 percent at $1,302.89 an ounce by 3:22 p.m. EDT (1922 GMT). Earlier, gold hit a low of $1,290.34 an ounce, and at the time was on track for its biggest one-day drop since Oct. 1.
U.S. COMEX gold contract for June delivery settled down $27.20 at $1,300.30 an ounce, with trading volume in line with its 30-day average, preliminary Reuters data showed.
Traders said the metal's recent short-covering rally, after the Fed's March meeting minutes last week showed officials were not keen on increasing interest rates straight after unwinding bond purchases, was susceptible to a sell-off. Gold hit a three-week high of $1,330.90 an ounce on Monday.
"Gold was hit by profit-taking as the rally to $1,330 on Fed minutes appeared overdone. The break below 200-day moving average and $1,300 level also triggered tons of sell-stops," said Thomas Capalbo, precious metals trader at brokerage Newedge.
In physical market news, Chinese firms may have locked up as much as 1,000 tonnes of gold in financing deals, a report from the World Gold Council said, indicating a big slice of imports had been used to raise funds due to China's tight credit conditions rather than to meet consumer demand.
The financing-related buying in the world's top gold consumer means prices could come under pressure if imports are hit by a broader crackdown on using commodities for finance.
Silver prices tracked gold lower, hitting their lowest since Feb. 4 at $19.24 an ounce, down 3.4 percent. They were later down 2 percent $19.53 an ounce.
Among other precious metals, palladium fell almost 2 percent after five straight days of gains, retreating from 2-1/2-year highs hit this week on fears U.S. sanctions on No. 1 producer Russia would curb supply and on prolonged mine strikes in South Africa.
Palladium was down 1.6 percent at $793 an ounce, while platinum fell 1.6 percent to $1,436.25 an ounce. 3:22 PM EST LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL US Gold JUN 1300.30 -27.20 -2.0 1284.40 1328.40 174,287 US Silver MAY 19.489 -0.521 -2.6 19.220 19.995 68,043 US Plat JUL 1444.60 -22.80 -1.6 1430.40 1468.30 10,686 US Pall JUN 795.90 -15.60 -1.9 786.50 809.95 6,295 Gold 1302.89 -23.21 -1.8 1290.90 1327.90 Silver 19.530 -0.390 -2.0 19.300 20.020 Platinum 1436.25 -23.65 -1.6 1430.50 1466.60 Palladium 793.00 -13.10 -1.6 788.00 809.45 TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG US Gold 182,414 185,520 176,462 16.14 0.47 US Silver 84,728 49,359 58,771 23.36 0.55 US Platinum 11,378 14,904 12,297 19.55 1.51 US Palladium 6,402 5,596 5,866 31.52 3.73 (Additional reporting by A. Ananthalakshmi in Singapore; Editing by Jane Baird, Jason Neely, Marguerita Choy, Meredith Mazzilli and James Dalgleish)
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