NEW YORK, July 23 (Reuters) - COMEX gold slithered to two-week lows on Tuesday on heavy fund selling due to a stronger U.S. dollar versus major currencies and tumbling mining company shares, traders and analysts said.
In silver, futures were sent to their lowest close in three weeks on gold's declines, due to a second day of liquidation.
Benchmark August gold futures at the New York Mercantile Exchange settled at $312.60 an ounce, shedding $10.90 or 3.37 percent, to its lowest close since July 8, trading from $323.50 to $311.50.
Spot gold last traded at $313.25/3.75 an ounce in New York, down from Monday's close at $322.90/3.40 and Tuesday's late London fix at $319.70.
Analysts said safe-haven gold fell as dollar-denominated bullion prices became more expensive to buy in relative terms for overseas buyers as the greenback rebounded on Tuesday, while the XAU gold and silver mining index fell again.
"Driving the metals to the mat is the rising U.S. dollar, which has taken flight in a broad upside surge against most major currencies," said Greg Weldon, editor of the daily Metals Monitor report. "Short covering in the U.S. dollar and ( U.S. stocks) along with liquidation in mining shares does not bode well for gold and silver over the medium term."
Donald Eckert, global bullion risk manager at JP Morgan Chase, said he believed the biggest influence on gold was two-days of sharp declines in the XAU index. "Gold equity stocks have been getting hammered the last two days and that's feeding over into gold (prices)," he said.
"When we broke $317.50 in COMEX August gold, we saw some fund selling," noted Eckert. "Definitely, U.S. dollar strength helped gold move down," he added.
After gold closed, the benchmark XAU North American gold and silver mining index traded on the Philadelphia Stock Exchange was down 7.49 points, or a whopping 11.1 percent, at 59.21.
Meantime, the dollar was racking up huge gains, which pushed the euro far below parity. The euro-zone currency traded at $0.9865/68 in the afternoon, off about 4 cents from its 2-1/2-year highs scaled on Friday.
Gold had reached three-week highs Friday on the dollar's weakness, but held off retesting last month's 2-1/2 year peak at $331.50 on a lack of follow-through buying.
Analysts were mixed on explanations for the dollar's rise on Tuesday. Some believed that corporations were taking profits in the currency market to cover losses from stocks, while others thought market speculators were scaling back bets that the dollar would extend its correction lower.
On Wall Street, U.S. stocks continued to see-saw, although bargain hunting lifted blue chips at times during another day of heavy trading. The Dow 30 stood 65 points lower at 7,718 in the afternoon, after previously skidding under the 8,000 level for the first time since 1998.
COMEX September silver futures sank 16.2 cents to close at $4.883 an ounce, after trading from $5.045 to $4.87, its lowest since July 2. Spot silver hit $4.87/89, off its last close at $5.02/5.04 and Tuesday's fix at $4.9875.
"For us (to) define the move as a full-blown technical breakdown, the $4.80 (basis COMEX September) level would need to be taken out," the Metal Monitor's Weldon said.
NYMEX October platinum fell $1.90 to $511.30 an ounce. Spot platinum was quoted at $514/522.30.
Thinly-traded September palladium futures rose $2.50 to $319 an ounce. Spot palladium traded at $315/327 an ounce.