UPDATE 1-Liquidity deficit speeds up record Shanghai gold rout
(Adds comments from U.S., European investors)
By Manolo Serapio Jr and Clara Denina
MANILA/LONDON, July 20 (Reuters) - A lack of liquidity hastened gold's 4 percent slide in a matter of minutes on Monday after a record 3.3 million lots of the metal, or 33 tonnes, traded on a key Shanghai physical contract, as top consumer China appears to be shunning bullion.
Spot gold hit $1,088.05 an ounce - its weakest since March 2010 - shortly after the Shanghai Gold Exchange opened, possibly paving the way toward $1,000 per ounce.
Investors have found less and less reason to hold bullion as a safe haven, with the dollar strengthening ahead of what is expected to be the first increase in U.S. interest rates for nearly a decade.
Traders said Monday's sellers had taken advantage of a low-liquidity environment, with Japanese markets shut for a holiday.
"The depth of the selloff looks to have been the result of a short squeeze magnified by illiquidity," said Christophe Donay, chief strategist at Swiss fund Pictet Wealth Management.
Some of the biggest price moves in gold since late October have occurred in Asian hours.
Bullion abruptly ended a 12-year rally in 2013, shedding almost a third of its value, as the Federal Reserve started reining in stimulus that had helped the U.S. economy get back on track. Continuación...